levels of foreign direct investment (FDI) will significantly increase domestic
manufacturing and Vietnam’s export earnings despite of depressed global and
regional trade flows. Besides, Vietnam’s rapidly expanding middle-class, which
is expected to reach 33 million people in 2030, will contribute to boost
consumer spending and retails.
In addition, agricultural
production is expected to pick up somewhat in 2017 given the outlook for higher
global food prices and a come back to better weather. However, the agriculture sector
continues to underperform relative to the rest of the Vietnamese economy,
dragging down overall growth.
According to ADB
Country Director for Vietnam, Eric Sidgwick, agriculture has been a vital impact
in growth, poverty reduction, food security, and exports since the government
began reforming the sector in the late 1980s. Nevertheless, in recent years, due
to the growing international competition and low domestic labour productivity,
the agriculture sector’s growth has slowed to an average of just 2% annually since
The report emphasises
that agriculture output per worker in Vietnam is one-third of Indonesia’s and
less than half of Thailand’s and the Philippines’. The report also highlights
that as Vietnam recovers from its most severe drought in a decade, boosting
growth in the agriculture sector will be crucial for Vietnam to achieve its
aspirations of becoming an upper-middle income nation by 2030.
continues to address the worsening impacts of climate change on agriculture,
deeper reforms and higher investment in the sector will be critical to boost
agricultural productivity and long-run growth that is inclusive and
environmentally sustainable,” Sidgwick said.
The report underlines
that to transform agriculture will need to address some major policy
challenges—including introducing greater competition into agricultural
supply-chains and postharvest processing, developing rural infrastructure to
support higher-value adding cash crops, adopting more sustainable natural
resource management practices, and better integrating climate change
considerations into policy making processes.
The outlook also highlights that as growth strengthens, inflation
is expected to edge up to 4 per cent this year and 5 per cent next year. The
expected rise in world food and fuel prices, higher US interest rates and a
stronger dollar will add to imported inflation. Another likely source of inflation
is the continued implementation of the Government roadmap on administered
prices for education, health, electricity, water tariffs and minimum wages.
Merchandise exports are seen rising by an annual rate of 10 per
cent over the next two years as new foreign-invested factories start producing
and new trade agreements take effect.
“Imports are likely to rise even faster as larger FDI inflows draw
in additional import of capital goods and manufacturing inputs. The current
account surplus is thus expected to moderate to 2 per cent of the GDP this year
and 2.5 per cent in 2018,” the report states.
Public debt pressures have prompted the Government to set
ambitious targets for the budget deficit, reining it to the equivalent of 3.5
per cent of the GDP this year and holding it to some 4 per cent next year.
However, most of the reduction in the fiscal deficit would be due to higher
receipts from the sale of equity in State-owned enterprises, which the
Government treats as revenue.
On the expenditure side, the Government plans to cut recurrent
expenditure by 6 per cent while raising capital expenditure by 36 per cent.
“Achieving fiscal consolidation over the medium term will be
challenging and require deeper tax reform, better revenue administration and
much more efficient public expenditure,” the report notes.
(ThS. Lương Thị Quỳnh Mai - Theo
Báo Công Thương, 4/2017