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Overview of Viet Nam’s economy in 2013 and forecast in 2014
26/5/2014 21:28' Send Print
Illustration photo. Photo source: Viet Nam News Agency

Remarkable achievements

Gross Domestic Product in 2013 was estimated to increase to 5.4% against the figure of 5.26% in 2012 of which 4.76% in the first quarter; 5% in the second quarter; 5.54% in the third quarter and 5.04% in the fourth quarter. Though economic growth rate in 2013 fell short of the target of 5.5%, it was recognizable. According to assessment of the International Monetary Fund (IMF), in 2013 the growth rate of the world economy stood at 3.1%. The growth rate of developed countries increased to 1.2% (the US 1.6% and Britain 1.4%); that of developing countries was 5% (China 7.5%, India 4.8%) as compared with 2012.

Amid the increase of the economy, the growth rate of the agricultural, forestry and aquaculture sectors rose to 2.67%, industry and construction 5.43% and services 6.56%. GDP structure changed for the better. Industry and construction proportion was estimated to reach 38.3% as compared with 38.63% of 2012; service sector achieved 43.31% as compared with 41.7% of 2012 and the agricultural, forestry and aquaculture sector 18.4% as compared with 19.7% of 2012. The service sector continued to make major contribution to economic growth with highest increasing rate among other components of GDP mainly due to import and export and tourism.

Industrial production was restored and made relatively high increase. The annual index of industrial production (IIP) was up to 5.9% as compared with that of 2012, of which processing industry and manufacture rose to 7.4%; electricity production and distribution rose to 8.6%. Industries with high IIP in 2013 were textile 21.1%; leather and related products 15.3%; products from molded metal (except equipment and machinery) 14.4%; engine-driven vehicle manufacture 13.5%; electricity production 9.6%.

Unsold inventory index by 1 December, 2013 of the processing industry was 10.2%, lower than 20.1% of 2012. Some branches could reduce their unsold inventory indexes such as uniform making, textile, products from molded metal (except equipment and machinery), products from non-metal minerals and engine-driven vehicles.

Industrial production structure was also in positive transition, concentrating on developing high-tech industries and high added value sectors, production for export, supporting industry, and agricultural, forestry and aquaculture processing industry. Processing and manufacturing industry proportion increased from 60.2% in 2010 to 78% in 2013.

Agriculture also recorded remarkable achievements. Rice output in 2013 stood at 44.1 million tons similar to 2012 and grain food output reached more that 49.3 million tons, contributing to ensuring national food security and maintaining Viet Nam’s position as the second largest rice exporter in the world. In 2013, Viet Nam exported nearly 7 million tons of rice. There were signs of recovery in animal husbandry, especially poultry raising. The total number of herd increased by 2.94% against that of 2012. By December 2013, no case of bird flu was reported throughout the country. Blue-ear pig disease did not last more than 21 days. Aqua product output was higher in both aquaculture and fishing with the annual output estimated to reach more than 5.9 million tons, an increase of 3.2% against 2012. Aquaculture recovered to achieve 3.2 million tons, reaching 3.1%, contributing to raise aqua product export turnover.

Area under concentrated forest was more than 200 thousand hectares, an increase of 8.5%. The number of scatteredly planted trees stood at 200 million, an increase of 2%. Progress was made in forest protection. Destroyed forest area reduced by 53% of which area under bushfire was lowered to 48% compared with 2012.

Foreign direct investment grew quickly. The annual total amount of newly registered capital and supplemented capital was estimated at US$ 21.6 billion, an increase of 54.45% against 2012. Licenses were given to 1.275 new projects with a total registered capital of US$ 14.3 billion, higher than target. Capital was supplemented to 472 projects with a total capital of US$ 7.3 billion.

FDI disbursement was estimated at US$ 11.5 billion, an increase of 9.9% against 2012, concentrating mainly on processing and manufacturing industries which accounted for US$ 16.6 billion, an equivalent of 77.2% of the total registered capital; electricity production and distribution, gas, hot water, steam and air conditioner reached US$ 2 billion, accounting for 9.8%; the remaining branches achieved US$ 2.7 billion, accounting for 13%.

In 2013, 50 provinces and centrally-run cities licensed new FDI projects. Those having large capital were Thai Nguyen, Thanh Hoa, Binh Thuan, Hai Phong, Binh Dinh, Ho Chi Minh city, Binh Duong and Hai Duong.

Among 55 countries and territories having newly-licensed projects in 2013, South Korea was the largest investor with US$ 3.655,4 million, accounting for 26.5% of the newly-registered capital; next came Singapore with US$ 3.008,1 million, 21.8%; China: US$ 2.255,3 million, 16.4%; Japan: US$ 1.250,3 million, 9.1%; and Russia: US$ 1.021,6 million, 7.4%.

Export turnover was higher than target with trade balance. Commodity export turnover was estimated at US$ 132.2 billion, an increase of 15.4% against that of 2012 and target of which economic sectors inside the country boasted US$ 44 billion, an increase of 4%; foreign-invested sector (including crude oil) achieved US$ 88 billion, an increase of 22.4%. Seven commodities recorded turnover of more than US$ 5 billion, three of them gained more than US$ 10 billion. Two of them gaining more than US$ 15 billion were telephone and spare parts with more than US$ 21.5 billion, an increase of 69.2%; textile and apparel bagged nearly US$ 18 billion, an increase of 18.6%. Some other commodities with increasing turnover included electronic products, computer and spare parts, shoe, timber and wooden products, products from plastic material, vegetable and fruit, bag, wallet, suitcase and cap.

Import turnover was estimated at US$ 131.3 billion, an increase of 16.5% as compared with 2012. Domestic economic sector in the country recorded US$ 56.8 billion, a 6% increase; foreign invested sector reached US$ 74.5 billion, a 24% increase. In 2013, import products were mainly machinery, equipment, spare parts, and material for production. Products with import turnover of more than US$ 18 billion included machinery, equipment, tools and equipment reaching more than US$ 18.6 billion, an increase of 16% and electronic, computer and accessories reaching US$ 17.7 billion, an increase of 34.9%. Trade balance was restored with trade surplus below US$ 1 billion.

Tourism was gaining momentum. The number of foreign tourists visiting Viet Nam in the first 11 months was estimated at more than 7.5 million people, an increase of 10.2% compared with the same period of 2012 of which the number of tourists coming for tourism and recreation increased by 12.1%; for business increased by 8.3%; and for visit to relatives increased by 8.7%. The number of tourists from China was up to 34.1%; South Korea 7.4% and Japan 5.5%.

Inflation was under control. The consumer price index (CPI) increased to 6.04% in December 2013 as compared to the same period of 2012, lower than the target of 8%. This was the lowest index in 10 years. Bank interest rates also decreased; gold price and US$ exchange rate were stable. The objective of inflation control was achieved contributing to stabilizing the maro economy. This was a remarkable achievement in State management of macro economic policy, branches and levels in 2013.

Though the achievements were big and fundamental, there remained difficulties and challenges.

Limitations and constraints

The economic recovery rate was slow, unstable and below expectation. Noticeably, agricultural production is often considered as a pillar for the economy in difficulty, its growth rate dropped from 3.3% in 2016 - 2010 period to 2.68% in 2012 and was estimated to stand at 2.67% in 2013. Price slump and agricultural and aquatic product consumption drop in 2013 came as a result of people’s difficulties and total demand of the economy.

Budget revenue fell short of target. Total budget revenue was estimated at more than VND 790 thousand billion, accounting for 96.9% of the annual estimated revenue. Given big revenue deficit, the Government requested the National Assembly to lift expenditure ceiling to 5.3% of GDP from 4.8%. Several provinces and cities could not fulfil their budget revenue including Ha Noi which could collect only more than VND 136.7 thousand billion or 84.7% of the target. Credit growth rate stood at 9% lower than the target of 12%.

The number of businesses which had to stop operation was relative high. By December 2013, more than 60.7 thousand businesses including owner-absent FDI projects stopped or suspended operation. The number of businesses restarting operation or newly-licensed businesses was not high due to lack of capital and market.

Public debts were large and higher than 2012. Public debt outstanding according to the Law on Public Debt Management by the end of 2013 stood at US$ 72.5 billion, or 56.2% of GDP. However, this proportion was considered within safe limit and did not affect the macro economy and under the limit permitted by the National Assembly which was 65% of GDP.

Commodity and service market was stagnant, total demand increased slowly, and social consumption rates did not see any obvious change. Total Retail Sales of Social Consumer Goods was 5.5% (minus price increase rate). There was no sign of recovery in real estate market.

The total social investment was also lower than the figure of 2012. The total social investment from State budget accounted for 95.6% of the annual plan, a reduction of 0.4% as compared with the same period of 2012. Centrally-managed investment also declined by 17,9% constituting 92,8% of the annual plan.

Though export was higher than target, it was not stable. Export turnover of agricultural products dropped as compared with 2012. Most obvious were those of rice, coffee, cassava and cassava products, tea, vegetable and fruit. Products which gave high turnovers like electronic products, telephone and textile and apparel were products of subcontracts. We still depended largely on Chinese market so imports from this market in 2013 rose to more than 50% as compared with 2012.

The CPI was not stable though higher than target and was likely to go up during months before the Lunar New Year holidays because prices of some imported products such as gas, petrol and health services depended on world market and price management was not strict.

These limitations and constraints were attributable to both objective and subjective reasons including natural disasters, big flood, poor infrastructure which were considered the major ones and caused negative impacts on production and business in 2013.

In general, in 2013, key economic targets were reached and overfulfilled. Most prominent were macro economic stability, inflation control, industry recovery, high export growth rate, trade balance, FDI higher than target and boosted tourism. Though several limitations and constraints remained but they were on the one hand due to objective factors and on the other hand not fundamental. Thus these achievements contributed to ensuring social security, improving people’s material and spiritual life and maintaining national defense and security. These bespoke great endeavor of the whole political system, the entire Party, people and army.

Economic projection in 2014

In 2014, Viet Nam’s economy will develop in a mixed favorable and difficult situation. As far as advantages are concerned, the world economy is recovering though still slow. Economic association, especially in Asia in general and ASEAN countries in particular continues deep changes to strengthen cooperation in competition through free trade agreements. The trade agreements which Viet Nam signed with the European Union (EU) and other big powers will usher in new advantages and development opportunities, especially in the fields of development cooperation, economy, trade, science, technology, agriculture and tourism. As far as difficulties are concerned, the world economy will recover but is still in an inertia. In Viet Nam, natural disasters in 2013 left heavy consequences to development. In addition, poor infrastructure, low State budget revenue, inactive commodity, real estate and stock markets, and social investment under target will lead to lack of capital for several construction works in 2014. However, Viet Nam’s economy prospect is forecast to be brighter than 2013 but there will be no big leap. Growth rate projection of some main economic indicators in 2014 are as follows:

- Industrial production index 5.8%.

- Total goods circulation growth rate 5.8%.

- Export turnover growth rate 13% - 15%.

- Trade deficit/export turnover rate below 1%.

- CPI growth rate approximately 6.7% - 7.0%.

- GDP growth rate approximately 5.6% - 5.7% as compared with 2013 of which agricultural, forestry, and aquatic product will increase by 2.1% - 2.2%, industry and construction 5.5%, and service sector 6.4%.

- Total social investment capital 28% - 29% of GDP.

- FDI growth rate 14% - 15% (including projects which will receive more capital).

- FDI approximately US$ 14 billion, a slight increase as compared with the figure in 2013.

- Foreign tourists to Viet Nam 7.8 million people, an increase of 11% as compared with the figure in 2013.

- State budget over spending 5.3%.

This projection is based on real development in Viet Nam and the world in 2013 and prospect of 2014. According to the IMF, the world economic growth rate in 2014 stands at 3.1% as in 2013, so investment and trade will not see high growth rates.

For Viet Nam, according to a report on 2 December 2013 of HSBC bank, the Vietnamese economy is stabilizing. The report also warned that if there was no obvious progress in structural bottlenecks, the economy was likely to stay at the same growth rate for years.

Reality is that Viet Nam’s economy in general will recover but still slow even in processing industry, agriculture and FDI attraction. Total social investment capital can hardly achieve the target of 30% due to a decline in State budget revenue and businesses’ capital. Due to a shortfall in State budget revenue, over spending can only be allowed at 5.3% provided that the State issues comprehensive policy and measures to raise revenue and practices thrift. Because of constraints in production and business recovery in 2014, high bad debts and no sign of commodity, real estate and stock market recovery, credit growth rate can hardly achieve targets.

Despite numerous difficulties, Viet Nam’s economic prospect in 2014 will be brighter than 2013. To harness advantages, overcome difficulties and achieve objectives set out by the National Assembly, branches, levels and the political system should exert great efforts to implement State policy which is concretized in Government’s economic and financial measures to step up production and business in the right direction. Persistently realize the objective of stabilizing the macro economy and inflation control. Continue flexible monetary policy and strict financial policy. Regulate interest rates suitable to inflation control objective. Increase appropriate credit outstanding and ensure credit quality. Effectively manage exchange rates, foreign currencies and gold market to ensure Vietnamese currency’s value. Push up export and export control. Increase foreign currency reserve. Develop capital, stock, commodity and real estate market.

Strengthen State budget management, concentrate on preventing loss, practice thrift, resolutely cut or reduce unnecessary expenditure including 10% cut of administrative expenditure and concentrate capital for development investment. Synchronously take measures to implement the master plan on economic restructuring in 2014 focusing on investment restructure, especially public investment; bank and financial restructure; State business restructure particularly State-owned economic group, corporation and agricultural restructure in association with building new rural areas./.

This article was published on Communist Review, No 855 (January 2014)

Assoc. Prof., PhD. Nguyen Sinh Cuc