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Experts skeptical about high economic growth in 2017
Tu Giang
Wednesday,  Jan 17, 2018,23:43 (GMT+7)

Experts skeptical about high economic growth in 2017

Tu Giang

HANOI – Economic experts have cast doubt on last year’s higher-than-expected economic growth of 6.81%, saying it might not have been that high.

Speaking at a workshop held in Hanoi on January 16 to launch a macroeconomic report for the final quarter of last year and all of 2017, Nguyen Duc Thanh, director of the Vietnam Institute for Economic and Policy Research (VEPR), said his institute had calculated the Vietnam Economic Performance Index (VEPI), whose results are not as impressive as GDP growth.

VEPI is based on data on indicators like commercial electricity output, export-import turnover and credit growth. The index in quarter four last year was 7.28%, higher than in previous quarters and the same period of 2016, while the officially announced GDP growth this quarter was 7.65%.

The fact that GDP growth was way above VEPI is seen as abnormal, Thanh noted.

According to economic expert Pham Chi Lan, there is a differential between the figures announced by VEPR and the Government’s General Statistics Office (GSO). When GSO announced economic growth results, many people asked what led to phenomenally high economic growth in the last two quarters of last year.
Lan described VEPR’s figures as more subjective.

Former Minister of Trade Truong Dinh Tuyen threw his weight behind VEPR’s calculations. He said that his growth forecast for last year was not at all close to what was published by GSO.

As estimated by VEPR, economic growth this year might reach 6.65%. Growth is expected at 6.02% this quarter and 7.27% in the second quarter.

According to the VEPR, the macro economy has become more stable but there are many problems still unsolved, including low labor productivity, rising budget deficit and heavy dependence on the foreign direct investment (FDI) sector.

Economic growth has yet to be driven by labor productivity. Vietnam’s labor productivity is still lower than in regional countries, making up just one-fourth of Singapore’s, one-sixth of Malaysia’s and one-third of Thailand’s, the VEPR report said.

If there are no comprehensive measures for increasing labor productivity in the near future, Vietnam will find it hard to maintain its current growth momentum.

FDI enterprises make up half of industrial production value, 72% of export turnover and 20% of gross domestic product (GDP). This sector makes substantial contributions and changes to labor productivity, whereas almost no change is seen in the private sector, according to Tuyen. 

According to Lan, development of the private sector must be examined through two angles: new enterprises and dissolved enterprises. “There are more startups but the number of dissolved businesses remains high.”
However, positive changes have been seen such as a declining proportion of mining, an increase of processing and manufacturing and a shift to high-tech agriculture, she added.

Budget deficit and high public debts are also seen as major impediments to economic development. According to the report, against the backdrop of less international aid, Vietnam needs to rely on domestic resources to spur growth.

Regarding a GSO request to include the informal economic sector in GDP, Nguyen Duc Thanh was quoted by VnExpress as saying that an increase in GDP could pave the way for the Government to borrow more, so it should be carefully considered.

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