ADB forecasts Vietnam’s economy to grow 7.1 percent in 2018
Updated : Thursday, April 12, 2018 10:25 AM (GMT+0700)

TheVietnamese economy will rise to 7.1 percent this year, before easing back to6.8 percent in 2019, said the Asian Development Bank (ADB) in a new reportlaunched on April 11.

 
At the press conference to launch the ADB new report on April 11 - Photo: VNA

“Aided by able macroeconomicmanagement, economic growth will spurt in 2018, with Vietnam becoming one ofthe strongest performers in the region”, said ADB Country Director for VietnamEric Sidgwick.

Vietnam’s robust economicgrowth will be driven by vigorous manufacturing and export expansion, risingdomestic consumption, strong investment fuelled by foreign direct investment(FDI) and domestic enterprises, and an improving agriculture sector, headded. 

Vietnam has been able tomobilise an abundant supply of young, well educated workers to attract foreigninvestment to labour-intensive manufacturing over the last decade. However, asthe Vietnamese economy becomes more sophisticated, the gap between workerqualifications and business needs is widening, Sidgwick warned, noting that ifnot addressed, this skills gap could become a major obstacle to Vietnam’sdevelopment aspirations.  

The ADB report showed thatrobust private consumption is expected to be supported by rising incomes andstable inflation and prospects for private investment are bright. 

By sector, solid FDI shouldenable the industrial sector to maintain strong growth momentum. Constructionis projected to pick up in 2018 and 2019, benefitting from last year’s recordFDI commitments and disbursements.

Meanwhile, the servicesector is projected to sustain growth in 2018 and 2019, with tourist arrivalsforecast to rise by 15-20 percent this year and bank lending to grow by 17-18percent. Agriculture is expected to continue to pick up over the next twoyears, growing in 2018 broadly in line with the government target of 2.8-3.0percent. 

Inflation is projected toedge up but remain broadly stable, averaging 3.7 percent this year and risingto 4.0 percent in 2019 as strong domestic demand and high bank lending arepartly offset by stable domestic food and transportation costs, along withsmaller increases in administered prices for education, health care,electricity and water. 

The current account surplusis projected to narrow to 2.5 percent of GDP this year and 2.0 percent in 2019.Merchandise exports are forecast to rise by 15-20 percent in 2018 and 2019.Remittances are likely to remain strong thanks to improving global prospectsand a stable exchange rate.

Pointing out challenges toVietnam’s economic growth, the report noted that the country has an abundanceof efficient labour working for relatively low wages. This attracts large FDIinflows especially for labour-intensive export-oriented manufacturing. Since2012, manufacturing has absorbed on average 400,000 workers per year. However,a skills gap is emerging as an obstacle to FDI absorption and to business moregenerally.

To address this skills gap,Vietnam needs to prioritise three sets of initiatives toward strengthening itsuniversities as well as technical and vocational education and training (TVET)system: expanding access, improving quality, and streamlining governance.

Source:VNA

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