Slowdown in economic figures challenges growth efforts

According to the General Statistics Office (GSO), industrial production in May rose by 7.1% year on year. Of which, mining contracted 7.6% while processing and manufacturing increased 9.1% and electricity production and distribution expanded 11.2%.

These rates are lower than the corresponding figures in April. Notably, the mining industry fell by a further 2.6 percentage points and processing and manufacturing dropped 3.2 percentage points. Only electricity production and distribution hiked 1.5 percentage points due to an increase in power consumption in summer.

Between January and May, industrial production climbed 9.7% from a year earlier, higher than the 6.6% growth in the same period last year. Processing and manufacturing grew 11.8%, electricity production and distribution rose 10.6%, but mining declined by 2.2%.

The GSO said although processing and manufacturing continued to post a fast growth pace, it has slowed down, from 15.5% in January – February to 14.1% in January – March, 12.5% in January – April and 11.8% in the five months.

Meanwhile, food prices have rebounded, which will boost food production but also influence the consumer price index (CPI), which is targeted at 4% at most in 2018.

The CPI in May grew 0.55% from the previous month, the highest rate since 2012, 3.86% from the same period last year and 1.61% from last December.

Do Thi Ngoc, Director of the GSO’s Price Statistics Department, pointed out the surge in pork and animal feed prices. The Price Management of the Ministry of Finance attributed the CPI hike partly to the increases of petrol and gas prices and grain food prices, which was boosted by stronger rice export demand.

On the other hand, GSO data also showed less positive signs for business activities. More than 11,000 new enterprises with registered capital of VND104.8 trillion were set up in May, down 24% in the business number and 21.5% in capital from April. They registered 80,500 employees, down 24.5%.

The number of firms resuming operations in May was more than 2,300, down 29.7% month on month.

A decrease was also recorded in foreign direct investment (FDI). This year to May 20, Vietnam granted new investment licenses to 1,076 FDI projects worth over US$4.65 billion, up 14.6% in the project number but down 16.8% in value. As many as 393 existing projects registered to raise their capital by over US$2.49 billion in the five months, down 47.4% year on year.

New and additional FDI capital in the period hit about US$7.15 billion, an annual decline of 30.8%.

Aside from the abovementioned factors, there remain problems in the economy, including growth’s dependence on quantity instead of quality, low labour productivity compared to many countries and the upward trend of CPI in the months to come.

Vietnam aims to achieve economic growth of at least 6.7% in 2018, the same target as 2017.

To reach this year’s targets, Minister of Industry and Trade Tran Tuan Anh stressed the necessity for more support for businesses in processing and manufacturing, a core industry of the economy.

Meanwhile, Director of the GSO’s Industrial Statistics Department Pham Dinh Thuy called on industrial investment projects to be sped up to improve production capacity, services with high added value to be developed and domestic consumption stimulated.

Bui Quang Tin, CEO of BizLight Business School, suggested monetary policy be more flexible to fuel production activities and keep the CPI stable.