PM: Inflationary pressure remains high

03:33' PM - Tuesday, 23/10/2018

Despite its impressive economic performance in January-September, Vietnam is still facing many potential risks this year, especially a rise in inflationary pressure, Prime Minister Nguyen Xuan Phuc said at the opening session of the sixth sitting of the 14th National Assembly (NA) today, October 22, in Hanoi City.

Remarkable achievements

The prime minister was delivering a Government report on the nation's socioeconomic performance this year and plans for next year.

Despite the fluctuations of the local and global markets, especially with the ongoing U.S.-China trade war, Vietnam’s economy has achieved positive results.

In particular, the country achieved a gross domestic product (GDP) growth rate of 6.98% during the period, and the full-year figure may exceed the target of 6.7% set previously by the NA. The average consumer price index has been kept under 4% for three consecutive years.

Local banks’ outstanding loans in the nine-month period had increased by 10.41%. The rate was forecast at below 17% for the whole year. Local banks offered more loans for priority sectors but tightened credit for high-risk sectors, such as real estate and securities.

In addition, the foreign exchange market was stable, with foreign reserves surging to a record high of over US$60 billion.

Vietnam may be upgraded to an emerging market, the Government leader remarked.

As for trade, Vietnam generated US$325 billion from foreign trade in three quarters, including US$238 billion from exports, up 11.2% and surpassing the target of 7-8%.

Of this amount, domestic enterprises reported a growth rate of 17.5% in export revenue during the nine-month period, while the rate of foreign direct investment (FDI) companies was 14.6%, a milestone for the trade sector.

The country continued to enjoy a trade surplus of nearly US$5.4 billion in the year to September.

According to PM Phuc, the full-year State budget revenue is likely to be 3% higher than estimated, with a decline in revenue from import-export taxes and fuels but a rise in revenue from domestic production and business activities.

Besides this, the State budget was used more effectively in the period, with the capital allocated for investment projects accounting for 26.8% of the total, higher than the 23.6% seen in the same period last year.

The budget deficit reached 3.67%, lower than the target of 3.7%, and public debts made up 61.4% of GDP, down from 63.7% in 2016.

The prime minister also mentioned the equitization of State-owned enterprises, which had helped these firms operate more efficiently. The sales of stakes in 20 State-run enterprises had earned VND20.3 trillion (US$869.8 million) for the State budget, while the State capital divestment helped generate VND7.9 trillion.

During the period, the State Capital Management Committee was established, PM Phuc added.

Inflationary pressure

However, the higher prices of fuels and electricity as well as education and healthcare services may deal a hard blow to the Government’s efforts to control inflation.

In addition, the local economy remains vulnerable to future global market volatility.

Many sectors continue to encounter difficulties in their production and business activities. The link between FDI and domestic firms, especially small and medium ones, remains loose.

The nine-month period also saw slow progress and poor quality among certain projects. Moreover, policies, business conditions and administrative procedures in several sectors have hindered the operations of enterprises.

Although many international organizations have raised Vietnam's business rankings in terms of improving the business environment, the country dropped three places in the World Economic Forum’s global competitiveness index.

PM Phuc also highlighted the slow public investment disbursement and State-owned enterprises’ equitization, the low labor productivity and the limited participation of local firms in global value chains.

Also, Vietnam has participated in multiple free trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the free trade agreement with the European Union, with commitments on duties, market openness and intellectual property rights protection, so it is no longer entitled to previous incentives. - SGT -

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