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Calculating informal economic sector required to position Vietnam’s development path
The Hanoitimes – Recent GDP calculations have not fully reflected Vietnam’s economic performance, due to the unavailable statistics of the informal economic sector.
The inclusion of informal economic sector into GDP calculation is a necessary step to review Vietnam’s economic of scale and position the country’s development path, according to Prime Minister Nguyen Xuan Phuc.
Recent GDP calculations have not fully reflected Vietnam’s economic performance, due to the unavailable statistics of the informal economic sector, requiring measures to review and update these number independently, Phuc said in a meeting with the Ministry of Planning and Investment (MPI) on February 19.
The calculation would give a more complete picture on Vietnam’s economy, Phuc added.
In a meeting with the outgoing Chief Representative of the International Monetary Fund (IMF) in Vietnam Jonathan Dunn on February 13, Phuc requested support from the IMF in calculating and updating information on the country’s unobserved economic sector, which allegedly makes up a large proportion of the GDP.
At the meeting, Dunn said, by reviewing the informal economic sector, the IMF would help Vietnam calculate the nominal GDP more accurately. He added that even the statistics of the formal economy calculated in the GDP are unable to fully reflect factors which are only updated every 10 years.
A study by Fulbright University in 2018 estimated that Vietnam’s informal economic sector made up 25 – 30% of the GDP and 57% of the total workforce.
Major risks remain
At the meeting, Phuc warned against the risk of Vietnam being left behind and falling into the middle-income trap.
The PM referred to the World Bank’s statistics that Vietnam’s GDP based on purchasing-power-parity (PPP) per capita in 2017 reached US$6,776. For the average GDP per capita growth rate of 6% per year, equivalent to a GDP growth rate of 7%, by 2030 the GDP based on PPP per capita would be over US$13,600, equivalent to that of Thailand in 2011. By 2045, the figure would be US$35,000, equivalent to South Korea in 2015.
Sharing Phuc’s concern, Minister of the MPI Nguyen Chi Dung said the risk of being left behind and growing income inequality are serious challenges to Vietnam despite high economic growth rate over the last 30 years.
There is a possibility that Vietnam could not reach the five-year socio-economic development target of average GDP per capita at US$3,200 – 3,500 in the 2016 – 2020 period and US$10,000 by 2035.
In 2018, the country’s nominal GDP stood at VND5,535.3 trillion (US$237.64 billion), expanding a 10-year high of 7.08% from 2017, leading to a GDP per capita of US$2,587, up US$198 year-on-year, which is way far off the target.
Under this context, the PM expected legal reform to be one of Vietnam’s major breakthroughs in the coming decades, while the private sector, especially small and medium enterprises and household economy, to be the driving force for development.
Phuc mentioned the national development strategy for Vietnam to join the high-middle income countries by 2030 with a highly developed market economy under the leadership of the private sector, which is capable to compete and integrate deeply in global economy.
By 2045, Vietnam would become a high-income country for people with high-living standards, Phuc added.
Source: http://www.hanoitimes.vn/economy/2019/02/81E0D35F/calculating-informal-economic-sector-required-to-position-vietnam-s-development-/