The target has been set by the National Assembly after weighing up the pros and cons of the domestic and global landscape.
Evidence suggests that despite a significant period of difficulty, Vietnam’s macro-economy has stabilised, inflation has been kept under control and the global economy is expected to recover in 2014.
The government’s measures to ease business difficulties and support people’s lives such as tax breaks, lowered interest rates, and stable currency exchange rate, have paid off, creating the prerequisite for the economy to bounce back in 2014.
|Vietnam aims to keep inflation at less than 7% in 2014
“The recovery of the global economy will bring impetus to the Vietnam economy,” says economic expert Nguyen Minh Phong. “Several policies on tax and interest rate cuts introduced in late 2013 will continue to fuel business production and sharpen their competitiveness. In addition, the government’s other commitments to the National Assembly will help the country achieve the GDP target.”
Ministry of Planning and Investment (MPI) statistics show the national economy is gaining momentum, with GDP growth increasing steadily on a quarterly basis, from 4.76% in Q1 to 5% in Q2 and 5.54% in Q3. The Q4 figure is estimated at between 5.6-5.7% to bring the entire year’s growth rate to 5.4%.
In a report to the current National Assembly session, Prime Minister Nguyen Tan Dung highlighted the important factors behind economic recovery in 2014, stating that the government will continue with flexible monetary, tight fiscal, and appropriate interest rate policies along with tight inflation controls and the ironing out of existing problems for businesses.
Dr Tran Hoang Ngan, a member of the National Monetary and Financial Policy Advisory Council, says the government has identified barriers against national economic growth and has taken steps towards removing them. Its resolutions on facilitating business operations have been implemented and reviewed gradually to overcome weaknesses.
The government has also prioritised finalising institutions and laws to accelerate economic restructuring – a compulsory requirement for continued growth in 2014-15.
“It is imperative to build on the achievements we have made in 2013, including controlling inflation, maintaining low interest rates, fixing a steady currency rate and keeping trade deficit at around 6%,” says Ngan.
Dr Tran Du Lich, former director of the Ho Chi Minh City Institute of Economics, believes lowering lending and deposit rates, together with other macro-economic policies, will create optimum conditions for economic growth.
The crux of the matter, according to Lich, is realising major tasks and solutions the National Assembly has approved in its resolution on socio-economic development for 2014, with priority given to improving administrative reform to create a sound investment environment.
“We need a transparent mechanism for controlling the macro-economy. Vietnam’s competitiveness index remains lower than other regional countries, and our task is to accelerate administrative reform to support businesses,” he said.
However, there is growing concern about high inflation, commercial bank’s noon-performing loans, and business bankruptcy in 2014 that will slow down economic recovery.
The government has identified these challenges and introduced viable solutions for keeping the economy on the right track.