Enormous Potential For Higher Economic Growth
Continuous improvements to the business environment, national competitiveness, and efficiency of the economy will ensure optimal conditions for higher economic growth, Director of the Central Institute for Economic Management (CIEM) Nguyen Dinh Cung told Nhan Dan newspaper.
Q: In your opinion, what is the main motivation for stronger economic growth in the first four months of this year?
A: The rapid economic recovery in the first four months of this year has showed higher confidence in production and business activities.
The economic growth was mainly driven by the industry sector with the highest growth in the area of industry and construction. The industrial production index in four months rose 9.4 percent compared to the same period last year.
Consumption also increased by 8.67 percent, the highest rate since 2011, contributing 8.5 percentage points to economic growth. The total investment capital in the first quarter of this year increased 9.1 percent against the same period in 2014, equivalent to 30.4 percent of the GDP.
It was obvious that the economic growth in the first four months of 2015 was attributed to the recovery of production, consumption and investment. The recovery was also driven by the positive improvements in business environment in addition to the stable macro economy and increasing confidence in production and business activities.
However, such positive results were initial figures and there remain many troublesome issues.
Q: What are the troublesome issues?
A: Last year was a bumper year for agricultural production with good selling prices and good growth but this year has seen a poor harvest and declining prices of farm produce. Agricultural products that are congested at border gates or discarded to feed animals has remained an insolvable problem for many years.
Despite considerable improvements in domestic consumption, there was an insignificant improvement in the service sector, which was mainly driven by a drop in the tourism sector due to a decline in the number of foreign tourists over several months.
The pace of export has seen reduced speed and trade deficit has returned in addition to high budget deficit and increasing public debt.
The business environment and entry cost have been improved but the national competitiveness index has declined, showing unsatisfactory results in the Government's effort to facilitate enterprises.
I hope that the implementation of the Government's Resolution No.19 on measures to improve business environment and national competitiveness capacity in 2015-1016 will contribute to reinforcing these indices. It is expected that there will have appropriate adjustments to policy to impulse the sustainable recovery of the economy.
Q: What do you forecast for the economic situation in the subsequent quarters and for the whole year?
A: The GDP growth target of 6.2 percent is feasible.
The Macroeconomic Report for the First Quarter of 2015 released by the CIEM and the consultant group from the Restructuring for a more Competitive Vietnam (RCV) has predicted that Vietnam would achieve GDP growth of 6.18 percent in the second quarter of 2015, inflation increasing 0.85 percent compared to Q1, total exports increasing by about 9.7 percent compared to the same period last year, and a trade deficit of approximately 1.2 billion USD.
I think that Vietnam is able to achieve a higher economic growth if the country continues to improve the business environment; enhance competitiveness; improve productivity, quality and efficiency of the economy; as well as reinforce confidence in the Government's policies.
And if there are more effective policies for the development of private enterprises, Vietnam could achieve a GDP growth of 7 percent for this year.
Q: What policies should be considered to achieve this growth rate?
A: CIEM has made a number of recommendations. First, it is necessary to continue reforming the microeconomic foundations; consistently implement the Government resolution 19/NQ-CP on main tasks and solutions to improve business environment and lifting national competitive capacity in 2015-2016; and cease any discriminatory treatment and difference between private enterprises and state enterprises.
Regarding fiscal policies, they ought to avoid increasing revenues and over-collection, or adding more taxes and fees without reasonable explanation. Continue to simplify procedures and shorten the tax payment period and tax refunds; and accelerate the disbursement of Government bonds.
Consider and adjust the requirements of issuing bonds with a five-year maturity or more, in order to ensure medium- and long-term credit for enterprises. Control the state budget deficit ceiling at 3-4 percent of GDP.
Regarding monetary policies, top priority should be given to the completion of the process of restructuring commercial banks. Inflation is now at a low level, but doesn’t yet fully reflect the risk of rises in Q2.
Monetary policy should continue to operate in a cautious manner, anchor inflation expectations to help businesses stay firm with long-term investment decisions. The exchange rate change should also be considered in a careful manner.
It is also necessary to control imports by technical measures, and give priority to imports that help increase domestic manufacturing capacity; speed up the negotiation of free trade agreements (FTA) and closely link the negotiating process and the content of negotiations concerning international treaties with the process of the country’s economic institution reforms.
Strictly implement the management and control prices of some essential products and services to maintain the general price level, and support the inflation control target.
Carefully consider the roadmap to enhance medical and education services to avoid increasing pressures on inflation. Once the service price increases, clear explanation should be made and supporting policies related to poverty reduction should be deployed.-VNA