Strongest growth in ten years
According to the General Statistics Office (GSO), Vietnam’s gross domestic product expanded by 7.38% in the January-March period, which is the best first-quarter performance in the last decade. GSO Director Nguyen Bich Lam stated that there are three reasons behind such an impressive performance. The first is the strong momentum from the final months of last year. Secondly, economic output in the first quarter of previous years was usually relatively small while that of this year is much larger, resulting in a higher growth rate. And thirdly, Vietnam’s growth is usually affected by seasonal factors, of which impacts this year are smaller than in previous years.
According to the System of National Accounts Department, growth in the first quarter was primarily driven by the manufacturing sector, which grew by 13.56%, the highest rate in the past seven years. Mining activity also returned to growth, expanding by a slight 0.4% after two consecutive years of decline, and was no longer a drag on overall growth. Agriculture also expanded by 3.67%, outperforming the first quarter of every year since 2011. Tourism also saw stable growth with international arrivals jumping by 30%.
Other bright spots of the economy include a US$1.3 billion trade surplus thanks to a 22% rise in export growth. Private consumption increased and the standards of living improved.
Numerous challenges
GSO Director Nguyen Bich Lam said that Vietnam is enjoying advantages from the recovery of the global economy, which is projected to expand by 3.9% in the two years of 2018-2019. But there are also unpredictable factors. Global trade has recovered but is facing challenges from growing protectionism in major economies, especially changes in the trade policy, corporate income tax and interest rate adjustments in the United States. These changes will affect both Vietnam and regional countries. In fact, policy changes in major countries have always received the urgent attention of the Government. The Prime Minister has ordered ministries and agencies to watch these changes closely in order to introduce appropriate and swift measures.
At home, the Vietnamese economy is also confronted with a number of difficulties, including highly unpredictable weather, high tariffs of many Vietnamese exports to the United States, and inflation at risk of exceeding the target set by the National Assembly. Other challenges include low productivity and poor competitiveness, which have yet to be dealt with radically.
Head of the Department of Industrial Statistics Pham Dinh Thuy warned that Vietnam’s economic growth in recent years has been driven by the manufacturing sector, which in turn saw a major contribution by Samsung. It is estimated that the Korean phone maker’s output will increase by 18% in 2018. But growth in the first quarter was already 26.3%, meaning that growth in the remaining quarter will be slower, which certainly will affect growth in the manufacturing sector and the whole economy in the later months of the year.
Therefore, despite a high growth rate in the first quarter, it will not be an easy task to realise the full-year target of 6.5-6.7%, which will require the Government and ministries to take aggressive actions to promote growth.
