Monday, October 24 2016


Report evaluates local economy

Update: May, 29/2015 - 07:45
Speakers at the VEPR's conference in Ha Noi in May 28. — Photo VEPR
HA NOI (VNS) — Viet Nam stands to benefit the most among all signatories to the Trans-Pacific Partnership (TPP) treaty, but this would require fundamental institutional, policy and structural changes, a new report says.

The Viet Nam Annual Economic Report 2015, released yesterday, also proposes that Viet Nam establishes the Pan–Asia Marine Economic Cooperation (PAMEC), aiming to build a hi-quality marine infrastructure that would connect most of the important marine economies between the Indian Ocean and the Pacific Ocean.

These economies include including Australia, Canada, mainland China, Japan, India, Indonesia, New Zealand, Malaysia, Myanmar, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Viet Nam, and the United States.

The seven chapter report, a collaboration between National University Ha Noi, the Viet Nam Institute for Economic and Policy Research (VEPR) and the Australian Embassy, presents global and national economic evaluations in the context of Viet Nam's deepening international integration.

Nguyen Duc Thanh, VEPR director and co-author of the report, said local economic growth had recovered slightly, helped by low inflation (around 0 per cent in the first five months) that created macroeconomic stability. Further, prices of basic commodities, such as food and gasoline, decreased, while education and health service fees increased slowly and household consumption improved.

He added that sources contributing to economic growth had drastically changed. In particular, industry and production rose sharply, while the service sector slowed, especially the tourism industry.

Statistics on Viet Nam's annual economic growth and inflation during the last five years.

The report devoted one chapter to the exchange rate. By calculating the equilibrium exchange rate in Viet Nam, which is based on the purchasing power parity (PPP) and general equilibrium approaches, it was found that Vietnamese dong is overvalued by 7 to 11 per cent at the end of 2014, making it uncertain in how it might affect the economy.

A thorough analysis indicates that the overvalued currency has negatively affected agriculture, agricultural processing, heavy industries, light industries and mining, which were industries that contributed most to local job creation and improvements to the economy.

Thus, VERP said Viet Nam should propose a suitable route to assure a more competitive exchange rate for Viet Nam, at least at the level of an equilibrium exchange rate.

Also in the report, the institute drew two growth scenarios for 2015.

Vietnamese economist Le Dang Doanh (left) talks with international guests at the conference. — Photo

The first one saw a lower GDP growth, at around 6.1 per cent with 1.9 per cent inflation, while the second scenario brought a 6.3 per cent GDP and an inflation rate of 3.2 per cent.

Thanh said it would be worse if the second scenario occurred, explaining that the higher inflation trend would increase beyond the end of the year, and continue soaring in 2016.

The second scenario, according to Thanh, would put the local economy into a new spiral, balancing between inflation and the exchange rate. It would also increase the risk to the macroeconomy.

Leading economist Le Dang Doanh said he appreciated the report's details, but felt there should be more information on the investment and business environment in Viet Nam.

The release represented the 8th annual annual report on the local economy that VERP has published since 2008.— VNS

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