Sunday, 23 Jul 2017

GDP target of 6.7% is obtainable

Updated at Thursday, 13 Jul 2017, 11:32
The Hanoitimes - Achieving the growth target of 6.7% in 2017 will help decrease the foreign and governmental debt on GDP; as well as the budget deficit on GDP, and ensure the social welfare.
How to achieve this growth target is the main topic to be discussed between the Economic & Urban Newspaper and economic expert, Dr. Can Van Luc. 
Economic expert, Dr. Can Van Luc
Economic expert, Dr. Can Van Luc
Agriculture, Industry and service support are the bright spots

The growth rate of GDP in the first 6 months is 5.73%, meaning to reach the overall objective of 6.7% for 2017, the GDP growth rate of the last 6 months would be over 7.4%, what do you think about this scenario?

With the economic performance in the first 6 months, there is a low chance for us to reach the target of 6.7%, however, we still have many opportunities and advantages to attain this target. Firstly, agriculture, industrial and especially service sector are recovering. Secondly, external factors are expected to be more positive than last year (trade and investment). The third positive signs are drastic actions from the Central to local government in administrative reform and improving investment environment. 

As calculated by General Statistics Office of Vietnam (GSO), to achieve the GDP target of 6,7% in 2017, the agriculture sector has to grow above 3.05%; industrial and construction sector at 9%; and service sector at 7.94%. Which sector do you think will have the biggest impact on the economy?

The brightest spot in the context of economy in the second Quarter is the development in service and agriculture sectors. With this being said, the agriculture sector has done a good job and should be in the range of growth rate of 3.05% through transforming the production model and applying IT in production. In retail sales, consumer spending contributing to 97% GDP in 2016, an 1% increase would mean an increase of 38-40 trillion VND. In term of service, especially tourism sector, the revenue from last year is 400 trillion VND, and is expected to raise to 500 trillion VND this year. 

With a new policy in issuing visa online easing requirements for foreign tourists, the number of foreign tourists coming to Vietnam is estimated to be 13-15 million (an increase of 30%), leading to the development in other related services such as restaurants, hotels, transports, etc.

Increase efficiency in utilizing financial resources

The objective of total public investment is to reach 34-35% of GDP, which is higher than the estimation of 31,5%. Easing fiscal policy and improving public investment for growth, is this proved contradictory in the context of public debt and overspending are at an alarming rate? How do you solve the question of “investment – growth – public debt”?

Public investment not only has a direct impact on the economic growth, but also creates jobs. The driving force for economic growth in midterm is public investment. However, I want to note that public investment is already in the estimation but at low disbursement rate, i.e. reached 30% of target in the first 6 months. Source for public investment is mainly from the government bond, so the government will have to pay interest rate regardless of the disbursement. The biggest issue at the moment is the inefficient of utilization and allocation of the financial resources. 

Beside increasing the public investment, it is also necessary to attract investment from private sector. It is an important factor to relieve pressure on public debt. On the other hand, the government also need to focus on diversifying investment sources through public – private partnership model (PPP) with different kind of contracts such as BOT, BO, BT, etc.
Tourists on the walking street in near Hoan Kiem Lake.
Tourists on the walking street in near Hoan Kiem Lake.
Some suggested credit growth in the first 06 months is highest in the last 6 years at 8%, should we set the target of 18% for credit growth to increase the GDP?

We have to be cautious as the relationship between credit and growth is not clear. In our study of 52 countries (including Vietnam), with 10% of credit growth, the GDP will increase by an insignificance of 0.5%. But I think the rate of 8% is reasonable, putting the percentage of credit on GDP to 120%. Assuming economic growth rate of 6-7% per year and inflation rate of 3-4%, so the nominal GDP will be at 11%, if credit growth of 18%, what will be in the next 03 years? Restructuring and reform to increase the growth quality will be the driving force instead of easing monetary policies. Not to mention in case of credit growth at 18% but is invested inefficiently, it will lead to inflation and have negative consequences in the coming years.

Increase private sector capabilities

According to experts, the bottleneck of the economy for many years is not able to fully exploit the advantages of FDI enterprise. Despite a high number of newly registered enterprises, the majority are small and super-small enterprises, at the same time the rate of enterprises dissolution is quite alarming, what do you think about this?

Vietnam needs to put up effort in supporting the recovery of local enterprises, avoiding the situation of “two-speed” economy (the growth of FDI enterprises outpace the overall growth). Moreover, the government policies to attract FDI need to be in consistent with the strategic objectives, strongly focus on modern technology transfer and environmental protection. The competitiveness of domestic enterprises also need to be improved compared with the FDIs. In the coming time, the Government has put forward measures for the private sectors to become the driving force of the economy.

From your standpoint, what is the measures to ensure sustainable development of Vietnam economy both in short term and in long term?

I think the Government needs to focus on keeping the macro economy and inflation rate stable. This is the foundation for Vietnam to improve the economic growth potential in a secure and substantial way. In other words, exchange rates along with monetary and fiscal policies have to be kept stable, adjusting credit growth within the limit and keep the exchange rate flexible in the context of global economy. Some of the measures to improve the growth rate are: restructuring, transforming the economic growth model, improving production capacity, State own enterprises reform and equitize, creating a transparent and fairness business environment, etc. At the same time, the government needs continue its efforts in supporting start- ups with a view of reaching more than 1 million enterprises in 2020.

Thank you!
Nguyen Tung
Nguyen Anh -
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