The Vietnamese economy had a successful start when gross domestic product (GDP) growth in the first quarter of the year reached its highest level in a decade. This growth is relatively uniform in most key sectors, creating important motivation for the country to achieve the growth target set for 2018.
GDP growth in the first quarter of 2018 reached 7.38 percent, the highest growth rate for the first quarter over the past decade.
Strong growth in the first quarter was driven by the industry and construction sectors, retail-service sector, exports and macroeconomic stability. The industry and construction sectors posted a 9.7 percent growth rate, contributing 3.39 percentage points to the 7.38 percent GDP growth. According to the National Financial Supervisory Commission, the industry and construction sectors are one of the key drivers for strong GDP growth in the first quarter of the year, with the manufacturing and processing industry as the core. In fact, the industry and construction sectors saw its growth rate double over the same period last year. The manufacturing and processing industry contributed a 13.6 percent growth to this surge, mainly due to Samsung and the Formosa Group that put large-scale production plants into operation.
The second major driver of GDP growth was the strict control of inflation and the stability of the consumer price index (CPI). Specifically, CPI in March was down 0.27 percent compared to February. It increased by 2.66 percent year-on-year and 0.97 percent against the December CPI. This made CPI in the first quarter of the year rise by 2.82 percent year-on-year. Core inflation rose by 1.38 percent compared to the same period last year, lower than the target of 1.6-1.8 percent. According to experts, the month-on-month decline in the CPI was attributed to the fall in consumption after the Lunar New Year holiday in February.
Thirdly, in the January-March period, Vietnam’s total retail sales and consumer service revenues were estimated at VND1,048 trillion (US$46.1 billion), up 9.9 percent year-on-year, with retail sales accounting for more than three quarters of that figure. It shows that purchasing power continues to improve significantly. The service sector growth was also supported by an increase in international tourist arrivals in Vietnam, reaching more than 4.2 million, up nearly 31 percent. In addition, warehousing and transport also recorded decent growth, with 7.6 percent in the first quarter of the year.
Vietnam enjoyed an overall trade surplus of US$1.3 billion in the first quarter of the year, due to a 22 percent increase in export turnover. The FDI sector continued to be the leader of export-import activities with its value accounting for 66.2 percent of total turnover. The domestic sector also recorded growth with exports surging 18.9 percent, the highest figure in the past seven years.
In addition to the above factors, economists mention an improved business environment, stable lending and deposit rates and plentiful liquidity of the banking system. According to the 2017 Provincial Competitiveness Index (PCI) report jointly compiled by the Vietnam Chamber of Commerce and Industry (VCCI) and the US Agency for International Development (USAID), the average PCI in 2017 was the highest it has been since the ranking’s inception in 2005, and almost all provinces increased their score. Total realized social investment capital in the first quarter of the year increased by 10.4 percent compared to a year ago. The non-state sector’s capital accounted for 41.9 percent and grew by 16.9 percent. Total realized investment capital under the state budget in the first quarter of 2018 increased, too, equaling 14.4 percent of the annual plan and up 9.2 percent against the first quarter of 2017. In addition, FDI disbursement increased by 7.2 percent compared to a year ago. The results reflect the efficiency of government measures to improve the business environment and create favorable conditions to attract FDI.
Based on the results of the first quarter, the Ministry of Planning and Investment has forecast two scenarios for the country’s economic growth this year. The rate will either be 6.7 percent as targeted by the National Assembly, or 6.8 percent if the manufacturing and processing industry thrives for the rest of the year.