HÀ NỘI – Việt Nam’s targeted growth rate of 6.7 per cent for this year may be too ambitious given both macro and micro economic conditions, said Nguyễn Đức Thành, President of the Vietnam Institute for Economic and Policy Research (VEPR) yesterday at a conference.

Thành made the statement when he and his research team launched the Việt Nam Annual Economic Report 2016, entitled, “Forging new foundations for economic growth.”

It is difficult for the country to reach its targeted growth rate of 6.7 per cent this year and an average growth rate of between 6.5 per cent and 7 per cent during the period 2016-20 due to a decline in exports, an increase in inflation and volatile global markets, according to Thành.

The world’s economy recorded a growth rate of 3.1 per cent last year – the lowest since 2010, as developed economies showed a slow recovery and developing countries and emerging markets such as Brazil and India declined for a fifth year.

The decline of demand for energy and commodities on global markets have affected and will continue to weigh on Việt Nam’s economy, especially in oil exports.

Việt Nam’s economy also has to face a number of problems as economic growth was not evenly distributed among the country’s leading sectors.

The country’s growth rate was 6.7 per cent last year, however, there was a huge contribution from the industrial production and construction sectors, while income from the agricultural and service sectors declined, VEPR reports.

A sharp decline in crude oil prices and exports during 2015 also made the country record a big loss of 6.3 per cent in its budget income last year.

Public debt also remained a problem that the Government needed to fix as increasing Government debts may be risky for the whole economy in the future.

Meanwhile, local companies have not proven strong enough to grasp opportunities that are being brought in by foreign capital and free trade agreements (FTAs).

Thành said that domestic firms were unable to use their capital efficiently while labour quality remained low year after year, even while the number of labourers had increased year by year.

Việt Nam had attracted a large amount of foreign direct investment (FDI), however, local companies were unable to benefit from foreign capital due to a lack of necessary skills and knowledge, he said.

Đặng Ngọc Tú, vice head of the National Financial Supervisory Commission, said that economic development would face more difficulties this year.

He said that the drought would put more pressure on the agricultural sector, and a decline in the electronics markets would cut production in emerging countries, including Việt Nam.

The reduction of electronics production would certainly damage the country’s income as electronics exports account for some 50 per cent of the country’s total exports, he said.

Tú also warned that Việt Nam should take a more careful look into inflation as it may reach four per cent this year, which is much higher than last year’s rate.

Other participants were also concerned over the effects that China could pose to Việt Nam, as the world’s second-largest economy experiences unstable economic growth and is increasing its control over the East Sea in the last few years.

They also worried about the fact that China is trying to set up a new “Silk Road” over both sea and land to connect China with the Europe.

China’s new ambition will shove countries with underdeveloped mass infrastructures and facilities aside, damaging their economic conditions and relations if those countries are unable to improve their infrastructures or connect to the “Silk Road.”

Improve productivity

Việt Nam needs to improve the performance of local companies, including private firms and state-owned enterprises, in order to optimise the capital provided by financial institutions and international creditors, according to participants.

The Government should tighten fiscal policy in 2016 to reduce overspending in the State budget, and take control over financial lending to avoid creating “bubbles” in leading sectors such as industrial production and property.

Experts also suggested that the country should improve the quality of human resources to provide an adequate supply for the markets, and improve the quality of transportation and infrastructure to connect with other countries instead of staying out of this global development trend. – VNS