National Financial Supervisory Commission: Vietnam economy still has the great potential for growth

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In 2018, Vietnam economic growth is estimated at 6.9-7%

2018 GDP growth rate hits the highest rate in 10 years

According to Mr. Truong Van Phuoc, NFSC's Chairman, in 2018 there were a lot of changes in the global economy. It is noteworthy that although the economies of China, Europe and Japan were slowing down, the US economy grew strongly and continued to prove a pillar for world economic growth. As a result, global economic growth remained high at 3.7%.

Meanwhile, the trade war has significantly reduced the volume of global trade. In 2018, it was only 4.2%, and in 2019 it is expected to increase by only 4%. In addition, the increase in average crude oil price last year also caused inflation to rise by 3.78%.

In that context, the Vietnam economy continued to gain some remarkable achievements. According to Dr. Dang Ngoc Tu - Head of Research and Policy Coordination Department, National Financial Supervision Commission, Vietnam’s economic growth in 2018 is estimated at 6.9-7%, which is the highest rate in 10 years thanks to main motive sectors that are the manufacturing and processing industry and service industry; and the good growth of agriculture, forestry and fishery industry. Macroeconomic fundamentals continue to be maintained and strengthened. Total demand for the economy remained at a relative growth, exports and consumption increased higher than those in the same period last year.

Remarkably, over the year, inflation was controlled under 3.6%, the core inflation remained stable below 1.5%. In addition, the major balances of the economy are ensured, the international balance of payments surplus is high thanks to the trade balance, which is forecasted to have a trade surplus at a higher rate than 2017; financial balance continued to be in surplus thanks to good FDI disbursements and indirect investment inflows that were approximately US$ 2 billion, remittances grew by over 10%; The mistakes and errors significantly reduced compared to 2017. As a result, the State Bank of Vietnam (SBV) has increased its foreign exchange reserves to a record high (about 12 weeks of imports).

According to Mr. Dang Ngoc Tu, state budget balance ensured the progress of state budget collection due to good state budget revenue, while the state budget expenditure was controlled, the structure of revenue - expenditure improved positively, and public debt / GDP tendency to gradually decrease in recent years. The public debt/GDP rate in 2018 is expected to fall to 61.4% ( it was 62.6% in 2017 and 63.6% in 2016) due to positive economic growth. In addition, the national external debt / GDP increased from 48.9% in 2017 to 49.7%, mainly due to a sharp increase in self-loans and repayments of enterprises and credit institutions.

The representative of the National Financial Supervisory Commission affirmed that the financial fundamentals continued to be strengthened and further supported economic growth. Capital supply of the financial market has been improving towards step by step reducing dependence on the banking sector and increasing the role of the capital market. The capital supply from the banking sector reduced but was more efficient and effective. Liquidity was guaranteed, interest rates and exchange rates were stable. The stock market surged in size with market capitalization rate of 75% of GDP, exceeding the target set for 2020.

GDP in 2019 could reach about 7%

The National Financial Supervisory Commission forecasts that in 2019, Vietnam’s economic growth could reach 7% if it is well supported by international factors, such as benefiting from a shift in production due to the impact of trade wars, and the prospects of new agreements such as the CPTPP and other free trade agreements.

Inflation in 2019 could be influenced by increases in food prices and raw material costs for production in recent years. However, the pressure to increase CPI is not significant because the world commodity price is expected to increase slightly. According to the calculation, if excluding the revision of public service price, the average CPI in 2019 may be below 3.6%.

"The Vietnamese economy has a great potential for growth, but it needs to reform the institutions and business environment more strongly to increase private investment; thoroughly restructuring the economy; deeply and clearly shifting the growth model to take advantage of opportunities from international factors," said Dang Ngoc Tu.

Consumer lending in VN surged 65% in 2017 Consumer lending in 2017 surged sharply by 65 per cent compared to 50.2 per cent in 2016, ...

The National Financial Supervisory Commission also forecasts that the Vietnamese economy in 2019 will be more or less affected by unpredictable international factors. The US-China trade war is complex and is likely to continue and last longer, affecting global economics and trade growth. Therefore, fiscal sustainability should continue to be seen as one of the priorities for policy administration in 2019.