Việt Nam’s gross domestic product (GDP) is expected to grow 6.83 per cent in 2018, almost unchanged from 6.8 per cent over the same period last year.
Customs officers in the northern province of Lạng Sơn inspect imports at the Hữu Nghị International Border Gate. — VNA/VNS Photo Hoàng Hùng
The forecast was made by the National Centre for Socio-economic Information and Forecast (NCIF) under the Ministry of Planning and Investment, which organised a seminar on Wednesday in Hà Nội with the theme “Việt Nam’s economic prospects for the last six months of 2018 and the impact of US-China trade tensions”.
The seminar reviewed the country’s macroeconomic situation during the first six months of the years and discussed likely challenges in the second half as well as the impact of external factors, particularly US-China trade tensions, on Việt Nam’s economy.
The NCIF expects the GDP growth rate in the third and fourth quarter to reach 6.72 per cent and 6.56 per cent, respectively.
Average annual inflation is forecast to be in the range of 4 to 4.2 per cent.
“In the second half of this year, Việt Nam will still have to face many challenges, including pressure from the appreciation of the US dollar against other currencies after the US Federal Reserves raised interest rates on June 14 and signalled two more hikes to come later in 2018,” said Đặng Đức Anh, head of NCIF’s Analysis and Forecast Division.
He said American trade protectionism and fluctuations in the prices of basic commodities and energy will affect Việt Nam’s economic growth as the pressure to stabilise exchange rates and inflation is increasing.
“GDP growth in the first half was higher than the previous years’ figures but there are signs of ‘losing momentum’ due to a lack of supportive motivation. This is not only a concern in the second half of 2018 but also for 2019-20,” Đức Anh said.
“The boost for the second half’s GDP growth is slowing. Although manufacturing has long been considered as the driving force of economic growth, it depends too much on FDI and the market is already saturated with FDI,” he said.
The impact of policies to improve the business environment has also shown efficiency, he added.
At the seminar, Trần Toàn Thắng, head of the NCIF’s World Economic Department, said that the impact of US-China trade tensions is unclear and still in the realm of forecast.
On the positive side, the conflict would give Việt Nam a good chance to export to the US. However, on the other hand, if China cannot export to the US, it will boost its exports to other countries, including Việt Nam, Thắng said.
According to Đức Anh, the US-China trade war had not had any significant impact on Việt Nam’s economy in the first half of the year, but it needs to be followed continuously.
Thắng added that the US tax reform policies would affect the investment decisions of US companies all over the world.
By the end of 2017, the US had adopted the largest tax reform law in 30 years. It reduced corporate income tax from 35 per cent to 21 per cent. This made US companies operating in other countries, including Việt Nam, review their investment strategies.
They then redirected their investments to their own country for preferential rates, Thắng said.
He said the US tax reduction could also lead to a “wave” of tax reductions in many countries to prevent US businesses from withdrawing capital.
To maintain the growth momentum from now until the end of the year, Thắng said Việt Nam needed to create a transparent investment environment to attract more FDI from the US, continue to strengthen the capacity and readily link and absorb technology and receive skills transfer, increase management capacity, strengthen human resources and develop the capacity to sign and enforce long-term contracts. — VNS