Looking back on Vietnam's economy 2016: Recovery despite difficulties.

2016 was a challenging year for the Vietnam's economy when the global economic growth, and trade were lower than forecast. But with efforts of institutional reform, and investment and business environment improvement, the economic–social situation of our country continued to change positively and achieved remarkable results.

looking back on vietnams economy 2016 recovery despite difficulties
Need to appreciate and enhance internal resources, based on internal economic development. Photo: collected.

Macro-economy to be stabilized, major balances to be ensured

According to the Government, the most striking point was macroeconomic stability, the large balance was ensured. The government focused on directing, operating flexibility, coordinating between the fiscal policy with the monetary policy and other policies to control inflation, and stabilizing the macro-economy and promoting growth.

The Consumer price index (CPI) was estimated to increase about 4% in the whole year, bad loans continue to be processed in association with enhancing credit quality, ensuring liquidity and safety of the system. By the end of August 2016, the bad debt rate was 2.66% as reported by the State Bank.

On investment, the capital mobilized for development investment was accelerated in 2016. According to the Ministry of Planning and Investment, investment for development was relative high in 2016, the investment capital implemented from the State budget was estimated at 233.6 trillion VND. By the end of November, 2016, the FDI inflows reached more than $US 18 billion in the context of difficult and fluctuating economies and politics in the world. The government also had many strict management measures, avoiding loss of the budget through price transfers, reduced tax arrears and increased control, saved State budget expenses.

GDP growth not to hit the goal

According to experts, one of the highlights as well as the hallmark of economic development in 2016 was the focus to remove difficulties for production and business, promoting the economic growth.

Mr. Vu Tien Loc, Chairman of Vietnam Chamber of Commerce and Industry said that 2016 was the first year where the number of newly established enterprises achieved a record, surpassing the figure of 100,000. Recently, the World Bank also announced the business environment index, in which Vietnam rose 9 levels. This is very clear evidence showing the initial results of the economic growth process and businesses development. This is also the aspect stressed by economic expert, Pham Chi Lan, when she referred the results of socio-economic development of 2016. According to Ms. Pham Chi Lan, the belief of enterprises seemed to be restored gradually through the government’s efforts in promoting reform, improving the business environment, determining to build a government of integrity to make the economy grow better and better.

Besides these encouraging results, the economic development in 2016 still had some limits. According to the Government, when the economic context was difficult, the economic growth of 2016 did not reach the target of 6.7% as proposed, but the growth rate of 6.3-6.5% was also a positive result. The growth decreased mainly due to very cold, damaging weather, floods, droughts, prolonged saltwater intrusion, affecting the marine environment pollution for agricultural production, and the impact of the sharp decrease in the price of crude oil and coal prices for the mining industry. If the growth of the agricultural sector and the mining sector were the same as the previous year, the annual GDP would be over 6.7%. It is undeniable that the mining industry made great contributions to the budget, but 2016 also saw the economic growth year with less dependence on natural resources while the GDP growth remained stable despite the mining industry decline.

In the report in the session 2nd National Assembly XIV, the Prime Minister Nguyen Xuan Phuc said that with economic growth not achieving its proposed objective of 6.7% that would also affect other targets, in which the Vietnam’s ratio of budget deficit, and the government debt to GDP could be higher than expected, because the current budget deficit and public debt of Vietnam has nearly hit the ceiling. Under the forecast, the exports for the year gained the plan approximately, in which exports of processed industrial products increased a little, at 8.5% (same period in 2015 was 18.6%), exporting into the ASEAN region reduced. Besides, planning implementation of public investment capital has been slow, some projects using public investment capital have had low efficiency and insolvency while basic construction has remained large. The restructuring of many industries and sectors has been slow, treatment for bad debts and weak commercial banks has faced difficulty, and bad results. Restructuring and equitizing State businesses and divesting external investment have not achieved the plan. In addition, the capital market, security market, estate market have developed unsustainably, production and business of enterprises have faced more difficulty when nearly 11,000 businesses had completed dissolution procedures, terminated production and trading activities, and more than 55,000 companies suspended operations in 2016.

According to the experts, it is not difficult to explain the causes that the economic growth did not reach the target as originally proposed, because the context when we set out original criteria was more favorable than the actual events of the year. For example, environmental pollution incidents in four central provinces had shaken the lives of people in the area and many new problems arose about the environment, money invested in money projects was wasted… In this difficult context, it was very good to gain the result of over 6%. The economic expert Pham Chi Lan stressed: “This lesson gives us experience that we should not be too hard with the annual high growth target, when setting the goal, we could not imagine the problems which arose in implementation. Therefore, when discussing economic growth, we should discuss the signs and likely scenarios which may occur in the future, thus, we should have 3 scenarios: good, medium and bad, and corresponding measures for each scenario. Ready for any situation is necessary and much more important, especially in the volatile world today”.

Internal resources will determine growth

In the scheme of economic restructuring 2016-2020, the Government set an economic growth target of 6.7%. To achieve this goal, the Government's solution is to continue implementing strict fiscal policies, tightening fiscal discipline of the State budget, operating efficiently, coordinating closely between fiscal policy and currency policy, controlling inflation as defined targets, simultaneously, promoting mobilization of resources for development investment, including suitable research, promulgation of mechanisms and policies to mobilize gold and Currency resources in society.

Commenting on the ability to achieve the growth target of 6.7% of GDP in 2017, Mr. Le Quoc Phuong, the Deputy Director of the Industry and Trade Information Center, the Ministry of Industry and Trade said that the aim of 6.7% would be not easy, but if there are strong and drastic measures, Vietnam could achieve this growth goal, in conditions that the world economy would improve, domestic agriculture would face less risk from Elnino phenomena than in 2016 and our economy would be relatively stable. “However, the most important thing is how we achieve 6.7%, that means we have to achieve a relatively high growth in terms of the stable macro-economy, ensuring social security and environment and protection, not just looking at the number of 6.7%”, Mr. Phuong stressed.

2017 is predicted to be the year of unpredictable changes in the world economy that will affect Vietnam. Discussing these challenges, the economic expert Pham Chi Lan said that in order to develop, the key issue for Vietnam was reform, this was the request of Vietnam itself, although if there is the Trans-Pacific Strategic Economic Partnership (TPP) or not, the Vietnamese still have to reform, no one will do it for us. Moreover, without TPP, Vietnam also needs to be more aware that: Internal resources are still the best decision, any multilateral mechanism or bilateral mechanism will not decide the growth and development of Vietnam. Therefore, we must learn respect, promote internal resources, and rely on domestic resources for development.

In the context of the world economy with complex fluctuations and the situation of the country still with many difficulties and challenges, the economy continued to recover and grow. In particular, industrial production changed, many industries have higher growth rates than the same period last year. The index of industrial production increased by 7.3% compared to the same period last year, of which the manufacturing and processing industry increased by more than 11%, as well as being a leader in the export sector. Meanwhile, agricultural production has recovered gradually from a series of losses caused by natural disasters since the beginning of the year. The Government has also implemented many measures to promote exports when global and regional trade growth fell sharply. Accordingly, goods exports regained growth momentum, and total export turnover of the first 11 months of 2016 increased by 7.5% compared to the same period in 2015.

By Hoai Anh / Binh Minh - Customs News