The report showed that the economy in Q2 saw growth rate of 6.79% year-on-year, the highest in ten years.
The agriculture, forestry, fishery and service sectors continued to improve sharply. The industry and construction sector also grew at a high rate of 9.07% in the first half of the year.
Manufacturing continued to drive the economy, while the mining industry fell back to decline, reflecting the seasonal characteristic of the positive growth in Q1.
Inflation surged in Q2, reaching 4.67% at the end of June, due to rising food and fuel prices. Meanwhile, core inflation remained at 1.37%, reflecting the SBV’s prudent monetary policy.
Trade growth slowed in the second quarter of this year; meanwhile trade balance recorded a surplus in the fourth consecutive quarter and reached US$1.4 billion in Q2.
One noteworthy point in the VEPR study was that the number of temporarily ceased enterprises was abnormally high, while the number of new jobs declined.
Speaking at the report announcement, economist Pham Chi Lan raised concerns about the decrease in employment rate due to the remarkable rise of shuttered firms. In other countries such as the US, Europe or Japan, the employment rate was always a top priority, however, unemployment in Vietnam had not received sufficient concern from authorities, she said.
VEPR’s statistics also showed that Vietnam’s budget balance returned to a deficit in Q2, after a temporary surplus in Q1. Recurrent expenditures continued to be higher than 70% of total expenditures, while development investment expenditures had not improved much.
In the second quarter, the country’s total retail sales of goods and services increased in value but declined in volume over the same period last year, reflecting a recovery trend in prices in 2018.
The report said that investment growth in the private sector was strongest in all economic sectors. Meanwhile, newly registered foreign direct investment capital in Q2 reached a record level. Japan was the top investor in Vietnam the first six months of 2018.
The liquidity of the system was abundant due to the higher deposit growth than credit growth, coupled with foreign currency purchases by the SBV. Foreign exchange reserves continued to rise, reaching US$63.5 billion at the end of Q2, the same level as the International Monetary Fund’s recommendation.
Another notable point from the report was that the real estate market in Q2 declined in both Hanoi and HCM City, both in new apartments for sale and transactions.
Economist Pham The Anh attributed the gloomy real estate sector to some factors such as the slow growth of the economy, instabilities in exchange rate, consumer price index and the tension between the US and China.
“The potential risk of an increase in interest rates in the near future could also push the real estate market down,” he said.
VEPR’s report forecast that this year’s GDP growth target might clock in at 6.8%, higher than the 6.5 to 6.7% goal set by the National Assembly, as it forecast economic growth rates for the upcoming quarters to reach 6.65 and 6.55%, respectively.
The Vietnam Annual Economic Report, published by VEPR, is a series of annual reports summarising major economic issues in the previous year, giving an outlook for the coming year and providing policy recommendations.
The quarterly report was completed by the VEPR with support from the Konrad Adenauer Stiftung.