Vietnam’s first quarter 2015 growth quickens

 Vietnam's economic growth for the three months leading up to April 2015 will quicken to an annual rate of 5.4%, the National Financial Supervisory Commission (NFSC) forecast in a recently released report.

GDP to reach 6.2%

This trend will continue in the following three quarters of the year the report forecast, concluding that the Vietnam government’s growth target of 6.2 percent for the whole of 2015 is achievable.

It said Vietnam's US$184 billion economy while saddled with enormous bank bad debt and the inefficiencies of the state sector will get a much welcomed boost in 2015 as the Southeast Asian nation prepares to sign a raft of free trade agreements during the year.

Vietnam's export growth slowed modestly to 13.6 percent in 2014 from 15.2 percent the previous year and 18.2 percent in 2012, mostly due to lower volumes of crude oil exports along with reduced coal, rice and rubber exports.

Consumer prices contracted roughly 0.2 percent per month over the past five months, primarily on the back of lower oil prices while service costs and higher credit growth will likely put some upward pressure on prices, albeit gently, the report said.

Tran Du Lich, member of the National Assembly’s Committee for Economic Affairs, in turn predicted that this year GDP may surpass 6.2% and even reach 6.5% while in the period 2016-2020 it possibly could strike 6.5-7% with inflation at a 5-6% clip.

Inflation of 3%

The report forecast the average annual inflation rate would slow to less than three percent this year due to lower global oil prices, citing slowing core inflation in December 2014, and also taking into account the average annual inflation rate has been in decline over recent years.

Core inflation in December, which excluded the price of food, essential goods and public services, stood at around 3 percent, while the country's average inflation last year slowed to 4.09 percent from 6.6 percent in 2013.

Meanwhile, interest rates are dependent on inflation and the State Bank of Vietnam (SBV) monetary policy.

The SBV has set a target to lower the medium and short-term interest rates to below 10% this year. However, that is much easier said than done and may not be achievable the report concluded.

Thus, the government will have to to closely monitor the markets and policy to keep interest rates in check.

Grasp opportunities to make the leap
Domestic production and consumption have shown signs of recovery. The Index of Industrial Production (IIP) in January 2015 surged by 17.5% against the same period last year.

The NFSC reported that business and investor confidence has also been consolidated and kept steady. This is attributed to strong administration and institutional reforms bringing about a more transparent investment environment.

The business confidence index (BCI) of European businesses operating in Vietnam rose sharply since the fourth quarter of 2013 to hit a record high of 78 points in the fourth quarter of 2014.

Vo Tri Thanh, Vice Director of the Central Institute for Economic Management (CIEM) said in 2015 Vietnam is expected to conclude negotiations for a large number of free trade agreements (FTAs), opening up opportunities for local businesses.

These agreements will require businesses to devise proper strategies to effectively compete in the expanded markets.

In 2015, technological reform, developing an industrial supply chain and increasing labour productivity will be the order of the day.

VOV