Vietnam’s economy to grow at 6.7-6.8% in 2016: financial supervisory commission

Friday, 2016-01-29 22:55:39
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Quarter growth forecast for 2016.
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NDO – The National Financial Supervisory Commission (NFSC) on January 28 predicted that economic growth in 2016 will continued to improve, but at lower levels than in 2015, at 6.7-6.8%.

Macroeconomic will have favourable conditions to remain stable, with inflation at about 2-3% only.

However, the commission warned that economic stabilising policies still need to prevent pressure from the global economic environment for interest rates and exchange rates, as well as increasing pressure from domestic public debt.

According to the agency, in 2016 world trade and the global economy is expected to recover, but with no less uncertainty. Global commodity prices continue to fall but at a lower level. The US has begun gradually raising interest rates whilst a majority of countries worldwide continue to ease monetary policies. In this context, many currencies around the world have lost value against the dollar and the trend is forecast to continue in the coming period.

In 2015, the domestic economy strongly recovered and inflation remained at its lowest level in ten years; economic restructuring achieved initial results, and the business environment has improved. However, the business community, especially in regards to domestic enterprises, still faces lots of difficulties, amidst little support from monetary and fiscal policies.

The basis for the NFSC’s forecast is that in 2015 GDP growth was at 6.6%, higher than set plan early (6.2%). The main driving force for growth in 2015 is the industry with industrial production index increased by 9.8-10% compared to 7.6% in 2014. Business establishment registration saw a strong increase in 2015 in both the number and registered capital, up 26.6% and 39.1% respectively compared to 2014.

Total retail sales of consumer goods and services (excluding the price factor) increased by 10.6-10.8%, the highest level in five years. Consumer confidence index last December was at 144.8 points, 9.2 points increased compared to the same period in 2014 and the highest level since early 2014.

In 2015, inflation was at 0.6%, the lowest since 2001.

Along with that, 2015 is also the second consecutive year to witness improvement in the ranking of Vietnam for competitiveness and business conditions. In particular, the competitiveness ranking rose from 70th in 2014 to 68th and business condition ranking rose from 93rd to 90th.

According to the NFSC, world commodity prices are forecast to continue to decline in 2016, helping reduce domestic prices of consumer goods as well as production costs. However, the decline in world commodity prices in 2016 is forecast at lower than in 2015. Consequently, the gap between inflation and core inflation will not be as large as in 2015.

Macroeconomic stability maintained in the last three years also helps to stabilise distress for inflation among the population.

Aggregate demand in 2016 is expected to increase over 2015, thereby affecting inflation. However, the increase is not large enough to be of concern, even when taking into account the impact of wage increases of public servants in 2016.

The commission forecast that core inflation in 2016 will not be much higher than in 2015, sitting at around 3%, and inflation will be lower than core inflation, at around 2-3%, compared with the goal of controlling inflation at below 5% set by the National Assembly.