GDP target achievable, but risks building

After Vietnam’s economic growth in July-September reached 7.46 per cent year-on-year, the strongest third quarter growth since 2011, the 2017 GDP growth target, considered by many economists as “ambitious”, is now claimed by the General Statistics Office (GSO) as achievable.



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The statement came after the GSO reported 6.41 per cent year-on-year growth in GDP in the first three quarters of 2017, the strongest in the period since 2015 and up from 5.7 per cent in the first half and 5.9 per cent in the same period last year.

The services, industry and construction, and agriculture, forestry, and fisheries sectors were the main contributors to the nine-month GDP growth rate, expanding 7.25 per cent, 7.17 per cent, and 2.78 per cent year-on-year, respectively, GSO Head Mr. Nguyen Bich Lam said.

The industrial index of production in September rose an estimated 13.2 per cent against September last year, the highest growth since February, while the trade surplus grew for the third straight month in September, to $400 million.

Vietnam received an estimated $12.5 billion in foreign direct investment (FDI) in the first nine months, up 13.4 per cent year-on-year.

After failing to hit its target and with the economy slowing for the first time in four years in 2016, the government has said that Vietnam needs to grow 7.4 per cent in the second half of 2017 to achieve the full-year goal and has called for an increase in credit growth to 21 per cent this year despite concerns over bad loans, lower interest rates, and an increase in investment.

Results from the third quarter are a positive sign for the country and pushes it towards its full-year growth target of 6.7 per cent.

Still, Capital Economics’ Senior Asia Economist Mr. Gareth Leather said that despite the upbeat short-term outlook, which has been helped by firm exports and accommodative monetary policy, risks are building.

“In particular, we are increasingly concerned by the rapid increase in debt,” he said. “Credit booms on the scale that Vietnam is experiencing are not sustainable over the long term.”

The State Bank of Vietnam (SBV) is among a handful of Asian monetary regulators to ease interest rate policy this year, unexpectedly cutting its benchmark rate for the first time in three years in July. Prime Minister Nguyen Xuan Phuc in August also asked the central bank to take steps to bring down banks’ lending rates to help businesses.

Total outstanding loans in Vietnam’s banking system grew 11.02 per cent year-on-year as at September 20, higher than the 10.46 per cent expansion in the same period last year. Money supply increased 9.59 per cent in the same period, below the 11.76 per cent increase a year earlier. Meanwhile, deposit growth at banks slowed to 10.08 per cent from 12.02 per cent in the same period last year.

Recent efforts to raise already strong bank lending growth by cutting interest rates to historical lows have the potential to increase financial sector risks, particularly given the large stock of past unresolved bad debts, the Asian Development Bank (ADB) said in a report released earlier this week.

VN Economic Times

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