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Outlook for GDP growth gloomy

Update: October, 11/2016 - 09:00
Assoc. Prof. and Phd. Nguyễn Hoàng Ánh
Viet Nam News

Assoc Prof and PhD Nguyễn Hoàng Ánh, vice director of the Institute for International Economics and Trade under the Hà Nội Foreign Trade University, speaks to Hải Quan (Customs) newspaper about the Government’s decisions to revise GDP growth targets.

In Cabinet meeting last week, Prime Minister Nguyễn Xuân Phúc lowered the Gross Domestic Products (GDP) growth target from 6.7 per cent, put forward at the beginning of the year, to 6.3 to 6.5 per cent. What has affected the initial growth target?

Việt Nam has witnessed a lot of troubles in 2016, after a relatively successful 2015. This year has been marked with many environmental crises, with the Formosa incident in four central provinces being the worst. To make matter worse, there have been droughts, saline intrusion, floods in HCM City, pollution in Hà Nội, etc.

In 2015, Việt Nam signed various free trade agreements, but their effectiveness has yet to be seen. It’s the same with the ASEAN Economic Community, which took effect on December 31 last year.

While more than 50 per cent of the labour force work in agriculture, this sector has contributed little to GDP growth. As we lack efficient management, agriculture experienced negative growth in the first half of the year. Unsafe food has made consumers turn away from the country’s agricultural products.

In this context, both the Asian Development Bank (ADB) and the World Bank have lowered Việt Nam’s economic growth forecast to 6 per cent, while the Government is still determined to attain 6.3 – 6.5 per cent.

One positive is, as a rule in economics, the economy often expands more in the third and fourth quarter. Việt Nam’s economy largely depends on foreign direct investment (FDI), while many contracts with FDI enterprises are conducted in the last months of the year. Therefore there may be more driving forces for GDP growth in the remaining months of the year.

How did the negative impacts you mentioned affect businesses’ operations?

To some extent, these impacts caused insecure feelings among people and businesses. When people feel insecure, the economy can not grow well, particularly as this feeling has lasted for a long time. According to economist Phạm Chi Lan, since we joined the World Trade Organisation, businesses have downsized despite the growth of the economy. Entrepreneurs think that it is better to stay small but safe than vice versa.

On top of that, there has been an annual increase of Vietnamese people emigrating. This is called “the third migration wave” of entrepreneurs and intellectuals who can provide the country with knowledge and added value. For example, early this year, when a debate broke out about “criminalising” online business operations, many startup entrepreneurs left for other countries because procedures to establish a business there are much easier. A former student of mine told me he moved his business to Estonia, a member of the European Union (EU). He said the procedures for starting a business there were very simple with everything done online.

Although the Government has recently shown its determination to accelerate socio-economic development, there remain many troubles. Why is this?

Since the new Cabinet took office, the Prime Minister has shown an active attitude by setting forth favourable mechanisms for enterprises’ development and administrative reform. But one leader can not make a change if the whole system does not function well. Besides the Government, many other State agencies have contributed to changing the country. However, the impact has been limited due to old mechanisms. For example, Dr Nguyễn Đình Cung, Director of the Central Institute for Economic Management, once said his agency tried to help State agencies to remove some papers [that enterprises need to obtain] each year, only to see that same amount being added, in other forms, at lower-level authorities. It is, therefore, crucial that we drastically change the “ask-give” mechanism to prevent officials from causing difficulties for enterprises and prevent corruption.

Another problem is our economy lacks sustainable development. We have focused on real estate and exploitation of natural resources. These unsustainable practices have made left us in the middle-income trap.

What do you predict for 2017 and the years that follow?

I think the economy will expand this year and next year but the speed will be slower. Development will not be sustainable because we mostly rely on cheap labour and there are unresolved social problems. Social stability will help the economy develop sustainably. The Government should take drastic measures to make breakthroughs in both society and the economy. The Government should refrain from pursuing just numerical growth targets but also focus on increasing growth quality to achieve sustainable development and social stability, helping the economy withstand impacts from inside and outside the country. – VNS

 

 

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