Vietnam’s economy: Last year’s achievements and this year’s aims


Last year, Vietnam’s economy grew at its fastest rate for a decade. The country’s gross domestic product (GDP) ballooned by 7.08% in 2018, driven by a rise in exportsdomestic demand, foreign investment, and the strength of its manufacturing sector. The target had been for growth of between 6.5 and 6.7%.

So after reaching, or in some instances exceeding, its socio-economic goals for 2018, the government has now set itself a range of new ones over the year ahead. Here we explore last year’s achievements and next year’s targets in light of this:

Vietnam’s economic structure in 2018

The country’s services sector is still the most important area of the economy, accounting for 41.17% of the total last year. Industry and construction came in next at 34.28%, followed by agriculture, forestry and fisheries at 14.57%.

Trade

The export of goods and services grew by 14.27% in 2018, while imports rose 12.81%.

Goods

Vietnam experienced a trade surplus of US$7.2 billion last year, with foreign direct investment (FDI) accounting for a surplus of US$32.8 billion and domestic activity showing a deficit of US$25.6 billion.

Domestic consumption hit US$237.5 billion, an increase of 11.5% compared with 2017. Within this category, domestic sales grew by 11.3% to US$94.8 billion, while foreign imports hit US$142.71 billion, up 11.6%.

Export revenues also increased by 13.8% to US$ 244.72 billion in 2018 compared with the year before. Exports from domestic companies rose by 15.9% to US$69.2 billion, while FDI, including crude oil, grew 12.9% to US$175.52 billion.

Services

Turnover from exports in the services sector increased last year by 13.2% to US$14.8 billion, with travel and transportation accounting for 68.1% and 19.5% of the total respectively. Import turnover rose by 8.1% to US$18.5 billion, with transportation and travel again accounting for 47.8% and 31% of the total.

Major sectors

Agriculture, forestry and fishery

The agriculture, forestry and fishery sector grew by 3.76% in 2018, accounting for 8.7% of the economy’s overall growth. The fisheries sector grew the fastest at 6.46%, compared with 6.01% in forestry and 2.89% in the agricultural arena. 

Industry and construction

The industry and construction sectors grew at 8.85% last year, contributing 48.6% to the economy’s overall growth. The manufacturing and processing segments witnessed the highest growth rates at 12.98%, which was lower than 2017 but higher than the 2012-2016 period. Construction grew at 9.16%, while mining continued to slow, contracting by 3.11%.

Services

The services sector grew at 7.03% in 2018, down from 7.44% the previous year. The wholesale and retail sales segment grew the fastest at 8.51%, followed by financialbanking and insurance activities at 8.21%. Accommodation and catering services, transportation and storage, as well as property grew by 6.78%, 7.85%, and 4.33% respectively.

FDI

In 2018, registered capital reduced by 13.9% to US$25.57 billion compared with 2017, but disbursed capital hit US$19.1 billion, up 9.1%. Hanoi, Ba Ria-Vung TauBinh DuongDong Nai, and Ho Chi Minh City were the leading cities and provinces in terms of registered capital.

Per capita GDP

Per capita GDP in Vietnam during 2018 was estimated to be VND 58.5 million (US$2,587), an increase of US$198 compared with the previous year.

Inflation

The consumer price index increased by 3.54% in 2018, which was lower than the government’s target of 4%. Core inflation, which excludes food, fresh foodstuffs, energy, healthcare, and education services, rose by 1.48%, which was again lower than the government’s target of 1.6%.

Targets for 2019

The government has set a softer GDP target of 6.8% for 2019, which is considered achievable as domestic demand and foreign investment are predicted to continue growing.

Moreover, export industries are likely to take advantage of the ongoing trade war between the US and China as well as foreign trade agreements such as the one struck with the European Union (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The aim in both instances is to go for market expansion to further strengthen Vietnam’s position as one of the major manufacturing hubs in Southeast Asia.  

After reaching or exceeding its socio-economic goals for 2018, the government has also set itself several new ones over the year ahead though. The focus here is on macroeconomic stability, growth, inflation control, productivity, trade, investment, and increasing the economy’s competitiveness.

GDP

For 2019, the government has set its GDP target at between 6.6% and 6.8% to try and set a balance between expected economic growth and controlling inflation. Doing so should allow Vietnam to manage the country’s social and macroeconomic situation.

Inflation

The aim is again to keep inflation at about 4% for 2019. But external factors such as rising oil prices, foreign exchange rate increases, the impact of global markets and trade can all affect the situation as can internal issues such as education, healthcare, and wage growth.

Trade and investment

Export revenues

Over the year ahead, the government intends to increase export revenues by a similar target amount to last year, that is, between 7% and 8%.

Trade deficit

The trade deficit target has been set at less than 3%, which is the same as for 2018. Last year, the country actually achieved a trade surplus of 0.4% though.

Investment

The goal for investment growth during 2019 is between 33% and 34%, the same target range that it was place during 2018 – a situation that has already been realised.

Poverty reduction

The overall poverty reduction target for 2019 has been set at between 1% and 1.5%. Last year, it was between 1% and 1.3%, which the government beat by hitting 1.5%. In poor districts, however, the target remains at 4%, which again the government exceeded last year.

Labour issues

Unemployment

For 2019, the aim is to keep unemployment below 4%. In 2018, the same target was exceeded, with worklessness hitting 3.14%.

Trained workforce

The government has increased its target for creating a trained workforce from 58% to 60% last year to 60% to 62% this year. In 2018, the figure hit 58.6%.

Healthcare

Health insurance

The plan is to increase the percentage of the population with health insurance to 88.1% during 2019 compared with 86.9% last year.

Hospital beds

The ratio of hospital beds per 10,000 people was 26.5% in 2018, but the aim for 2019 is 27%.

Environment

Wastewater treatment systems

The ratio of industrial parks and export processing zones with concentrated wastewater treatment facilities met its target of 88% in 2018. This target has increased by 1% to 89% this year.

Forest cover

Forest covered 41.65% of the country last year, but the goal is to boost that to 41.85% in 2019.

Vietnam’s track record of reaching, or even exceeding, its key socio-economic goals lays strong foundations for dealing with any feared global economic slowdown and ongoing trade tensions over the year ahead.

 

By Koushan Das

This article was first published on Vietnam Briefing

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