The Vietnam Institute for Economic and Policy Research (VEPR) has predicted Vietnam’s economic growth would accelerate in the third quarter and then reach 7.17 percent the last quarter to hit the Government’s target of 6.6 to 6.8 percent for the full year.
Workers manufacture mechanical tools at the Japan-invested Kyouwa company, based in the Long Hau industrial park of the southern province Long An (Photo: VNA)
In a macroeconomic report presented on July 11, the VEPR said the country’s economy grew at 6.71 percent in the second quarter of 2019, down from 6.79 percent in the first quarter. The institute forecast Vietnam's economic growth is likely to reach 6.96 percent in 2019.
According to the report, in the first six months of the year, social investment reached 822.9 trillion VND (35.47 billion USD), up 10.3 percent compared to the same period in 2018.
VEPR Director Nguyen Duc Thanh said that despite the expectation that the US-China trade war would stimulate the flow of capital into the country, the inflow had not really happened.
The 9.7 percent rise in FDI, compared to 8.5 percent in the same period last year, still lagged behind the investment poured into the non-state sector.
However, the FDI sector still played a crucial role in economic growth through exports.
More than 1,700 new FDI projects were licensed in the first half of 2019 with total registered capital of about 7.4 billion USD, down 37.2 percent from last year.
The manufacturing and processing sector attracted 73.4 percent of the newly registered capital.
China was still Vietnam’s biggest investor with the newly registered capital of more than 1.6 billion USD, followed by the Republic of Korea, Japan and Hong Kong.
“However, without a serious selection, FDI enterprises from China may bring potential risks of outdated technologies, negative environmental impacts and working conditions," said Thanh. "This will adversely affect Vietnam’s institutional reforms as it signs new-generation FTAs."
To meet the requirements and take advantage of the EVFTA (EU – Vietnam Free Trade Agreement), which was signed in late June, the report urged the Government to reassess incentives for FDI enterprises – including taxes and land rent reductions – to give them equal standing with domestic firms and ensure the quality of FDI.
Vietnam is expected to face both challenges and opportunities after joining EVFTA, which requires the country to improve labour conditions, environmental standards and intellectual property rights.
In the second quarter, some 38,000 companies were established, creating more than 330,000 new jobs.
The exchange rate of VND to USD in commercial banks fluctuated widely during the quarter and increased significantly in May.
According to finance expert Can Van Luc, the exchange is becoming more stable thanks to flexible mechanisms from the State Bank of Vietnam and strengthened foreign exchange resources. The exchange rate is only expected to fluctuate within a band of 1.5 to 2 percent from now until the end of the year.
Inflation rose to 2.65 percent, the lowest level in the last three years. However, it is predicted to increase in the near future following increases in food prices, education-related expenses and fluctuating energy prices.