Focusing on growth model innovation

Tuesday, 2017-10-10 13:17:59
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NDO – Vietnam’s gross domestic product (GDP) increased by 7.46% in the third quarter of 2017, compared to 6.28% growth rate in the second quarter, helping Vietnam’s overall economic output in the first nine months of the year to grow by 6.41%, meaning the growth rate in the fourth quarter must be at least 7.31% if Vietnam is to meet its full-year target of 6.7%.

Contributing to the country’s overall economic growth of 6.41% in January-September was the processing and manufacturing industry – which posted a growth rate of 12.8%, the services sector 7.25%, and the agricultural sector 2.78%. International tourist arrivals in Vietnam in the nine months remained high with more than 9.4 million arrivals, a year-on-year rise of 28.4%. The tourism sector hopes to welcome a total of 13 million foreign visitors in 2017. January-September growth was also buoyed by exports, which climbed 19.8% compared to the same period last year (6.7%) to an estimated US$154 billion, exceeding the year’s target of 7%.

In order to ensure high and sustainable economic growth, in the last quarter of 2017 as well as in the coming years, it is necessary to focus on growth model innovation with a gradual shift from breadth to further depth in economic development by restructuring all sectors and adopting technological advances in both industry and farming. As the total social investment in the last nine months increased by 12.1% over the same period in 2016, equal to 33.9% of GDP, the goal of reducing the dependence of economic growth on increasing investment capital is still difficult to realise, especially when the efficiency of investment remains slow with the incremental capital output ratio (ICOR) after nine months still about 5.3.

The promotion of economic restructuring should be consistent with the new economic growth model. Although the structure of the economic sector in the past nine months has continued to shift, the pace has been slow. There are no real breakthroughs in the agriculture, forestry and fishery sectors.

The GDP growth in 2017 is positive. However, it is necessary to maintain macroeconomic stability as it is a prerequisite condition for fast and sustainable economic growth. Although inflation remains well controlled with average CPI growth of only 3.79% in the first nine months of 2017, some large balances of the economy remain unstable.

Though State budget collection in January-September reached VND786.3 trillion, equal to 64.9% of the yearly estimate, total expenditure was VND851.5 trillion (61.2% of the yearly estimate), the State budget deficit was estimated at VND65.2 trillion - putting high pressure on the public debt limit. In addition, as of September 20, the credit growth rate reached 11.02% (the rate of the same period last year increased 10.46%) - higher than the growth rate of 9.59% of the total means of payment and the growth rate of 10.08% (the same period in 2016 increased by 12.02%). The capital mobilisation of credit institutions may have potential risks, especially in the context of high bad debt at commercial banks and the credit growth target for the whole year of 21-22%. Meanwhile, Vietnam’s export value till September of this year increased by nearly 10% to nearly US$120.7 billion while imports surged 16% to US$124.6 billion. This has pushed the trade deficit to US$3.9 billion.

In order to ensure fast and sustainable economic growth, it is necessary to develop facilitative policies and mechanisms, and create a favourable business environment for enterprises to achieve the set target of 6.7% economic growth this year. In addition to the overall measures, focus should be placed on short and long-term sustainable solutions in order to take advantage of all opportunities and conditions to accelerate growth in 2017, while supporting sustainable development, enhanced competitiveness and innovative growth models. Long-term economic development solutions need to focus on reforming procedures, reducing expenditure and shortening the time for businesses. Breakthroughs are determined to drastically improve the business environment, create confidence and encourage enterprises to invest and expand their production and business operations. The focus is on the private sector, which still has untapped potential for development.