Economists worry about economic growth as national debt grows

Truong Dinh Tuyen, former Minister of Trade, said at a recent workshop on the economic prospects in 2019 that Vietnam’s economy has had high GDP growth rate of nearly 7 percent in recent years, but it has relied heavily on FDI. 
The foreign-invested sector makes up 25 percent of GDP, with 75 percent of export value coming from FIEs (foreign invested enterprises). Meanwhile, FDI brings low value as FIEs mostly do outsourcing of Vietnam products.

Le Xuan Nghia, a member of the National Monetary Policy Council, said that no considerable progress had been made in the processing & manufacturing industry over the last 20 years.

“There has been no authentic product of the manufacturing industry over the last 20 years, except VinFast cars,” he said.

Regarding the labor structure and the added value per laborer, only 5.5 million out of 20 million workers are in industrial production. 

Meanwhile, Luu Bich Ho, former head of the Institute for Development Strategies, warned about public debts, including debts incurred by enterprises and people, amounting to 235 percent of GDP.

“How should we proceed with such big debts? How will we cope with the influences from the trade war?” he said. “I am afraid that the national economy will face big challenges from 2020. If we cannot reshuffle the finance & banking sector and state owned enterprises, a 7 percent GDP growth rate will be out of reach”.

What about 2019?

According to Vu Dinh Anh, a respected economist, the most important factor for 2019 is that the government has prioritized macroeconomic stability and the business environment, rather than aiming for the highest possible economic growth rate.

In the years to come, if the government is consistent in the policy, the GDP growth rates would be relatively high, around 7 percent. The growth rates would be below 8-9 percent as seen in previous years, but the cost for growth would be minimal.

Do Thien Anh Tuan from Fulbright University Vietnam said the three driving forces for Vietnam’s economic development in the time to come will be improvement in investment capital, productivity, and the investment & business environment.

Meanwhile, Nghia noted that Vietnam’s economy is approaching service sector development rather than industrialization, as initially oriented. He said this was positive, as Vietnam has two important advantages – agriculture and tourism.