Optimistic Forecasts for 2018 GDP Growth

Forecasts by ADB, IFM and ICAEW

In the second and third quarter reports of this year, the Asian Development Bank (ADB) retained its GDP forecast for Vietnam at 7.1 per cent in 2018.

In the report released in April, ADB forecast that Vietnam's economy will grow 7.1 per cent in 2018 and slide to 6.8 per cent in 2019 given that there are no trade shocks in place. Inflation will be at 3.7 per cent in 2018 before rising to 4 per cent in 2019 on domestic demand expansion and higher global commodity prices. Of course, ADB also pointed out that a serious incident between Vietnam's two largest trade partners - the United States and China - may lead to spill-over effects on economic growth. At present, Vietnam's annual trade value equals 185 per cent of GPD, making Vietnam the second-most commercially viable economy in Southeast Asia after Singapore. In its second report this year, ADB added that Asia's growth prospects could be significantly affected if the US-China trade conflict continues to worsen.

While ADB was consistent with these forecasts, some other international agencies also provided positive remarks on Vietnam's economic performance but predicted lower growth. In its annual report on Vietnam's economy released in July, the International Monetary Fund (IMF) forecast that Vietnam's economic growth may reach 6.6 per cent in 2018, while inflation is kept below the target of 4 per cent. IMF said the economy is extending its positive growth momentum. The growth engine of the economy is driven by macroeconomic stability, economic reform efforts and foreign direct investment inflows. The trade surplus may be reduced in the medium term but foreign reserves will be sufficient for about two to three months of imports.

In its ICAEW Economic Insight: South East Asia, the Institute of Chartered Accountants in England and Wales (ICAEW), forecast Vietnam's economy will grow at 6.6 per cent in 2018. The report is compiled by Oxford Economics under the order of ICAEW. The report noted that Vietnam's GDP growth was 7.38 per cent in the first quarter of 2018, the highest first-quarter growth in 10 years, on industrial manufacturing potential, well-performed service sector and increased agricultural output. Although foreign demands of moderated, domestic demand is forecast to pick up in 2018; FDI inflows are positive and consumer spending is vibrant.

12 plans completed

According to the Ministry of Planning and Investment, among 12 targets and plans approved by the National Assembly for 2018, eight are expected to be surpassed and four are hoped to come as planned. The ministry said GDP growth will reach 6.7 per cent as approved by the National Assembly. The agriculture, forestry and fishery sector will recover significantly and grow 3.3 per cent for the year thanks to continued sectoral and regional restructuring. The construction industry is forecast to climb 7.59 per cent and the service sector will rise 7.35 per cent.

In 2018, Vietnam's GDP is projected at VND5,555 trillion (US$240.5 billion) and the per capita GDP is US$2,540, an increase of 6.3 per cent from a year earlier.

The consumer price index (CPI) grew 3.52 per cent year on year in the first eight months of 2018, higher than the same period in 2017. The core inflation was 1.38 per cent in the eight-month period. Thus, the country can successfully rein the CPI growth below 4 per cent as expected by the Government and better than the target set by the National Assembly.

At the same time, the ministry estimated that the trade value will rise 11 per cent year on year to US$475 billion. The export value will be US$238 billion, up 11.2 per cent, higher than the target of 7-8 per cent recommended by the National Assembly and the target of 8-10 per cent proposed bythe Government. The import value is projected at US$237 billion in the year, up 12.3 per cent. The country will take a trade surplus of US$1 billion instead of a deficit equal to less than 3 per cent of exports.

Total social investment will be VND1,890 trillion in 2018, up 13.3 per cent from 2017 and equal to 34 per cent of the nation's GDP, as high as 33- 34 per cent set by the National Assembly.

In addition, the country saw 87,448 business startups with registered capital of VND878.6 trillion, up 6.9 per cent from a year earlier, and witnessed 20,942 enterprises to resume operations, 9.3 per cent more than in the same period in 2017. In total, Vietnam had nearly 108,400 new active businesses in the first eight months and was expected to have 130,000 new businesses this year, 2.5 per cent more than in 2017.

(Source: Nguyen Thanh/VCCI news)