Industry slide imperils GDP growth goal

According to the General Statistics Office, during this year’s first seven months, Vietnam’s index for industrial production rose 7.2% year-on-year, far lower than the year-on-year climb of 10% in the same period last year.

The processing and manufacturing sector, which account for 80% of the industrial sector’s growth, grew over 9%, lower than the 10.1% rise in last year’s corresponding period.

“Local industrial production remains weak, in addition to a growing number of enterprises with stalled operations,” said Tran Hoang Ngan, a National Assembly deputy representing Ho Chi Minh City.

The number of enterprises stopping operations in this year’s first seven months reached over 36,200, up 12% year-on-year. This is higher than last year’s corresponding period, when 32,000 enterprises faced the same fate, up only 1.2% year-on-year.

“Slow industrial growth and enterprises’ stunted confidence will make it hard for the government to reach its growth target of 6.7% this year,” said Ngan, who is a senior economic expert.

Last week, the Ministry of Planning and Investment reported to the National Assembly that the many obstacles were making it hard to hit that target. In order to achieve such a target, during the remaining six months of the year, the economy must grow at least 7.6%, far higher than the growth rate of 5.52% in the first half of this year.

“It will be quite hard to reach 7.6% in this year’s second half, meaning that we may never hit the target of 6.7% for the whole year,” Ngan said.

In July, HSBC forecasted that Vietnam’s 6.7% growth target for 2016 “will be very difficult to achieve,” due to “buffeted exports” caused by a “weaker global demand.”

Vietnam’s export turnover grew only 5.3% year-on-year in this year’s first seven months, far lower than the 9.5% increase in last year’s corresponding period.

Meanwhile, the government aims to see a 10% growth rate in the country’s export turnover for the whole of 2016-a rate that will help the economy grow 6.7%.

“We keep our 2016 and 2017 GDP forecasts unchanged at 6.3% and 6.6%, respectively,” HSBC said in its report on Vietnam’s economy.

However, Prime Minister Nguyen Xuan Phuc said that the government would try its best to achieve the growth target for 2016.

According to Phuc, if all ministries, sectors, localities, and enterprises continue to perform their best, and weather the economic obstacles, the economy can hit its growth target. The implementation of free trade agreements is expected to help Vietnam expand its export markets and have new business opportunities.

In its report on Vietnam’s economy released nearly two weeks ago, the International Monetary Fund forecasted that Vietnam would grow 6% this year. It was suggested that to reach higher growth, a second generation of reforms was needed to mitigate risks and raise economic growth potential.

“Medium-term growth will be challenged by low productivity in the domestic economy, and demographic headwinds will emerge in the longer run,” the IMF report said. ”Against this backdrop, the new government’s commitment to reforms is encouraging. Accelerating and broadening fiscal, monetary, banking, and structural reforms would place Vietnam in a sound position to achieve the authorities’ medium-term growth target of 6.5%-7%.”