Vietnam’s economic growth is still found at a downtrend and yet to have sufficient momentum to reverse it, VnExpress.net news site quoted Prof. Tran Tho Dat and Assistant Prof. To Trung Thanh from the Hanoi-based National Economics University (NEU) as saying at a recent workshop.
Despite posting a 6.68% expansion in 2015, the nation’s economy grew 5.8% on average in the 2011-2015 period, far below increases of 7.01% in the 2006-2010 period and 7.61% in the pre-crisis period of 2000-2006, the economists added.
Mr. To Trung Thanh noted that although the country’s GDP growth hit a five-year high in 2015, the quality of economic growth remained low, evidenced by its labor productivity lagging behind that of regional peers.
Sharing the same view, economists Ngo Thang Loi and Tran Thi Van Hoa, also from NEU, pointed out that Vietnam’s economic growth has been driven by outsourcing.
The two economists said that the outsourcing trend has spread from the industry to the agriculture, which has seen rising imports of fertilizers, pesticides, and animal and plant breeding. The deformations of the economic growth are also demonstrated by a slowdown of the service sector and the foreign-invested sector outpacing the domestic one.
The economists voiced concerns that Vietnam’s economy now heavily relies on foreign-invested enterprises. Even if the country’s economic reliance on China eases, its economy will still depend on FIEs, either from South Korea or any other countries.
Although FIEs contribute 18% to Vietnam’s GDP, their operations mainly comprise outsourcing. Just 5%-6% of them are hi-tech firm while up to 80% of them employ medium technologies, they said.
The experts also reckoned that Vietnam’s imports from China and South Korea would remain buoyant as the former is reliant on material imports from the latter.
In addition, Vietnam has integrated into the global supply chain but it stays at the bottom of the chain. Many transnational companies have chosen Vietnam to settle their manufacturing bases, part of their “China+1” and “Thailand+1” strategies amid rising labor costs in China.
The experts suggested that the Vietnamese government take steps to attract small- and medium-sized enterprises from foreign countries such as Japan, Taiwan and South Korea into supporting industries, instead of transnational companies only.
BIDV Securities Company (BSC) has said in its latest report that Vietnam’s economic growth is not sustainable as it depends on the foreign sector.
The country’s GDP growth would face challenges such as low labor costs, sluggish economic restructuring and the economic deceleration of Southeast Asia and China, BSC added.
The firm expected Vietnam’s economy to expand 6.7%-6.9% this year, buoyed by rising foreign direct investments, exports and domestic demand.
The country’s trade deficit is forecast at $4 billion-$6 billion while the Vietnamese dong would weaken by 5%-8% against the U.S. dollar.