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VEPR: 6.8% growth target feasible

Released at: 14:30, 13/04/2019

VEPR: 6.8% growth target feasible

Photo: Vietnam Institute for Economic and Policy Research (VEPR)

Latest report notes easing momentum and other economic uncertainties but states target is reachable.

by Ngoc Lan

Vietnam’s economy recorded growth of 6.79 per cent in the first quarter of 2019; lower than in the same period last year and showing that growth momentum is easing, according to a quarterly report from the Vietnam Institute for Economic and Policy Research (VEPR) released on April 11.

In the first three months there were 28,451 newly-registered enterprises, with total capital of VND375.5 trillion ($16.1 billion), down 6.2 per cent in number but up 34.8 per cent in capital compared to the same period in 2018.

However, the first quarter saw 14,761 enterprises temporarily suspend business for a definite period, up 20.8 per cent year-on-year. There were also 15,300 enterprises waiting for dissolution and 4,100 that completed dissolution procedures, up 23.9 per cent. This reveals that Vietnamese enterprises remain quite weak and the business environment needs to be further improved.

The import and export situation also shows signs of instability. VEPR noted the trade surplus was $816 million in January, but in February a deficit of $768 million was posted and then $1.63 billion in March. Meanwhile, exports are forecast to face many difficulties due to slowing global economic growth and more trade conflicts and political instability. This will more than likely lead to continued trade deficits.

The shift in FDI inflows to Vietnam aims to take advantage of opportunities from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). Risk prevention in US - China trade tensions is another point of interest this year.

But VEPR nonetheless believes the growth target of 6.6-6.8 per cent in 2019, set by the National Assembly, is feasible.

However, in the context of US - China trade tensions, protectionism, the risks from China’s economy, the uncertain future of Brexit and conflicts within the EU, and Donald Trump’s unpredictable behavior makes Vietnam’s economic picture in 2019 more uncertain.

In the long term, VEPR recommends that Vietnam streamline the State apparatus and cut down on regular spending. The country also needs to review preferential policies on taxation or land for FDI in order to create a more equal environment for domestic enterprises.

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