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|VEPR drew up two scenarios for Vietnam's growth path this year|
This two-scenario forecast was released by the Vietnam Institute for Economic and Policy Research (VEPR) at the conference Vietnam Annual Economic Report 2019 with the theme “On the doorstep to the digital economy” organised in Hanoi on May 29.
Accordingly, the first scenario featuring the GDP growth rate of 6.56 per cent, is roughly at the target set by the National Assembly.
“This scenario may occur due to the less favourable world economic conditions. The impact of the escalating US-China trade war puts Vietnam under new pressures and puts the country at risk of a trade deficit exacerbated by the Chinese exports and increased competition in the domestic market as both the US and China can boost exports to Vietnam,” said Nguyen Duc Thanh, chairman of VEPR.
“In addition, other countries also want to seize opportunities from the US-China trade war to boost exports to the US and China, so it is not easy for Vietnam to increase exports to both markets,” Thanh said.
The second scenario of 6.81 per cent is feasible, meeting the target of the National Assembly. This scenario can occur thanks to the economic growth momentum of 2018, coupled with government efforts to improve competitiveness and productivity, reflected by the high relative growth of major industries in the early months of 2019.
“The state and private sectors in Vietnam are trying their best in the field of international trade. This can be seen in the export growth rate of domestic enterprises which are higher than that of foreign-invested enterprises in the first quarter of 2019,” Thanh said.
Regarding the price level, inflation is expected to become more difficult to control in 2019 and it is likely to reach 4-5 per cent. In the first scenario, with economic activity slower than expected, inflation will reach 4.21 per cent.
In the second scenario, the annual inflation rate is forecast to reach 4.79 per cent, higher than the 4 per cent target of the National Assembly. The risk of inflation in the second scenario is quite possible if there is a resonance from both rising internal and external inflationary pressures. In terms of internal pressure, price adjustments for public services as well as petroleum prices at the beginning of 2019 will put great pressure on inflation.
Vietnam Annual Year Report 2019 is produced when Vietnam's economic growth slowed down at the beginning of the year due to weakening external and internal drives. The strategy to motivate growth via traditional resources, such as natural resources and cheap labour, is no longer suitable, as the Fourth Industrial Revolution has been creating fundamental changes to technological and digital resources, providing the seemingly unlimited potential to economic growth.
Along with the forecast for Vietnam's macro-economic outlook in 2019, the conference focused on evaluating the potential for Vietnam to transition into the digital economy.