Growth target leans on FDI in last quarter

Prime Minister Nguyen Xuan Phuc last week requested greater efforts from ministries, localities, and enterprises to reach a modest economic growth of 6.3-6.5% this year, which is smaller than last year’s 6.68%.

The economy rose quarter-on-quarter since early this year, from 5.48% in the first quarter to 5.78% in the second quarter, and to 6.4% in the third quarter.

The Ministry of Planning and Investment (MPI) last week submitted a scenario for 2016 growth to the government for discussion, based on different growth expectations in the fourth quarter.

“We can only reach 6.3-6.5% if we put in greater efforts to support enterprises and people,” said the prime minister.

For example, he asked the Electricity of Vietnam to ensure sufficient electricity for the entire country from now until 2020. Leaders of ministries and localities are also required to continue devising specific actions in favour of enterprises and people.

MPI Minister Nguyen Chi Dung told the government that in the remaining three months there is still some room to boost the economy-including foreign direct investment (FDI), disbursement of state budget investment capital, and government bonds, as well as improvement of the local demand and consumption.

The World Bank last week forecast that Vietnam’s economy is expected to grow only 6% next year, and also 6.3% in 2018.

In its update on Vietnam’s economy released in late September, the Asian Development Bank (ADB) also predicted that the economy may grow only 6% this year, and rise to 6.3% next year.

However, both banks are optimistic about the country’s outlook thanks to strong FDI.

“Vietnam’s medium-term outlook remains positive,” said Sebastian Eckardt, lead economist for the World Bank in Vietnam. “FDI has accelerated in recent months, reflecting positive investor sentiment about Vietnam’s deeper economic integration.”

FDI commitments in the first nine months of 2016 rose to US$16.43 billion and the disbursed sum hit US$11.02 billion, up 12.4% year-on-year.

It is expected that the figures for the whole year will be about US$24 billion and US$15 billion, respectively, which are higher than last year’s respective figures of US$22.76 and US$14.5 billion.

According to both the ADB and the World Bank, buoyant FDI inflows are expected to drive higher growth in manufacturing and construction until the year’s end.

Much of this investment is directed to manufacturing to generate a steep rise in production, and exports of mobile phones, electronics, and other products.

FDI contributes about 18% of Vietnam’s GDP, nearly a quarter of total investment, two thirds of total exports and millions of direct and indirect jobs, according to the World Bank.