On May 29, the Institute of Economic and Policy Research (VEPR) shows two forecasts for the Vietnamese economy at the Conference of Announcing the Vietnam Annual Economic Report In 2019.
According to VEPR, in a feasible scenario, GDP growth in 2019 would be 6.81%, meeting the target of the National Assembly. This scenario is likely to happen thanks to the dynamic growth of 2018 and the efforts of the Government to improve competitiveness and productivity which reflected with relatively high growth of major industries including industry and services. Besides, VEPR pointed out that domestic enterprises are trying to improve themselves in the field of international trade. This is reflected in the first quarter when the export growth rate of domestic enterprises is higher than that of FDI enterprises. This is different from the trend many years ago because FDI enterprises always achieve higher growth rates than domestic enterprises.
According to VEPR, regarding the general price level, the inflation in 2019 is forecasted to become more difficult to control and it is likely to reach 4-5%. In this scenario, VEPR’s annual inflation is forecast at 4.79%, higher than the 4% target of the National Assembly.
The risk of inflation under this scenario may occur if there is resonance of inflationary pressures which come from both inside and outside. In addition, the price adjustments for public services as well as petrol prices have been implemented since the beginning of 2019, which will put great pressure on inflation.
By the end of April, CPI has increased by 2.93% (yoy) and is on an upward trend. Meanwhile, this increase only reflects a very small part of the government’s price adjustments due to their latency. Outside, world crude oil prices may continue to rise as tensions in the Middle East escalate and world supply is cut. In order to control inflation, VEPR recommends that executives will need to continue to follow the price movements in the second half of the year. The State Bank needs to be cautious about regulating money supply, interest rates and credit in the coming time if it wants to maintain the inflation level not exceeding the target level.
Besides, VEPR also offers a different scenario, economic growth is low at 6.56% growth. In this scenario, inflation is expected at 4.21% due to slower economic activity. This scenario can happen when the world economic conditions are less favorable due to the impact of the US-China trade war increase brought new pressures.
At that time, Vietnam will face a greater risk of trade deficit from the Chinese market. The domestic market increased competition when both the US and China could boost exports to Vietnam.
In addition, other countries also want to seize opportunities from trade wars to boost exports to the US and China, so it is not easy for Vietnam to increase exports to these two markets.
VDSC