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Vietnam’s Economy: 2017’s double success and 2018 forecast

Friday 19, 01 2018
6.7 percent is the targeted growth rate in 2018 set by the National Assembly. Inflation rate is expected to be less than 4 percent. Most forecasts have so far predicted that all of the targets will be achieved.
Vietnam’s Economy: 2017’s double success and 2018 forecast
“It has been a double-success year for the Vietnam’s economy” said Associate Professor - Dr. Ngo Tri Long (former Deputy Director of Research Institute for Market Price) as the macro economy remains stable, GDP growth rate reached 6.81 percent, exceeding the target of 6.7 percent, inflation was only 3.53 percent lower than the 4 percent permitted by the National Assembly.

6.7 percent is the targeted growth rate in 2018 set by the National Assembly. Inflation rate is expected to be less than 4 percent. Most forecasts have so far predicted that all of the targets will be achieved.

In terms of the market price and inflation, Dr. Nguyen Duc Do - Deputy Director of Institute of Economics – Finance said that inflation has been at low rate in recent years due to the fact that budget spending and money supply during 2012-2017 are much lower than those in the period 2007-2011. If medical services price is excluded, the inflation rate of Dec 2017 was just about 1.16 percent, which is the lowest inflation rate ever and equal to the basic inflation. Dr. Nguyen Duc Do very much believed that the inflation rate would remain low for the time to come and by 2020, there would be no factor that can make the inflation rate surge.

That average basic inflation of the last 3 months of 2017 has dropped below 0.1 percent/month shows that inflation pressure from the current aggregate demand is very low. From 2018, it is unlikely that the Government will drastically adjust the prices of state-managed services by administrative measures since the price adjustment roadmap has already been finalized. Oil prices will also hardly increase as Fed has increased interest rates and ECB also tends to take fewer measures to support the economy. With the fiscal and monetary management determined by the Government, inflation in the coming time will maintain low and the price may increase due to the dependence on the global prices and the rise of health services, education, oil, food prices.

Forecast by experts: Pressure and potential risks
It is not easy to control inflation with 2017’s high GDP growth, especially when the world economy is still unstable, domestic economy is still difficult and many motives for growth are critical.

In his short-term forecast, Mr. Do reckoned that if in the final months of 2018 the Government do not adjust health and education service price, inflation will fall to approximately 2.6 percent, which is at a long distance to 4 percent target set by the National Assembly. He also expected that the inflation rate in the near future will still remain low, at around 1 percent.

As forecast by Nguyen Tien Thoa (Vice Chairman and General Secretary of Vietnam Valuation Association - former Director of Price Management Department (Ministry of Finance), there may be a lot of potential factors pushing inflation rate up like: credit expansion, exchange rates, electricity price adjustment, implementation of the minimum wage, market price of goods and services still valued by the State, natural disasters, epidemics ... According to Mr. Thoa, it may be possible to keep the CPI under control at 4 percent if some major regulatory solutions are deployed effectively right from the first months of the year

He forecasts that GDP in 2018 may reach 6.5 to 6.8 percent. 6. 5 percent is the growth rate without pressure on inflation. The 6.8% growth rate is achievable when stimulus measures are applied, but will put pressure on inflation. If the improvement policies also work, GDP growth in 2018 could be higher.
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