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Global uncertainties continue to pose threats to Vietnam economy: CIEM

The Hanoitimes – Uncertainties surrounding global trade activities, especially the escalating trade tensions between the US and China and the FED`s decision of hiking interest rates are putting pressure on Vietnam`s macro-economic management.
Vietnam still maintains high economic growth rate of 6.88% in the third quarter and 6.98% in the first nine months of 2018, however, global uncertainties continue to pose threats to the country’s economic prospects, according to Nguyen Dinh Cung, director of the Central Institute for Economic Management (CIEM). 

Uncertainties surrounding global trade activities, especially the escalating trade tensions between the US and China and the FED’s decision of hiking interest rates, are putting pressure on Vietnam’s macro-economic management, Cung said in a conference on October 17. 

“It is vital that the government solidify the macro-economic foundation, in turn ensuring economic resilience against external shocks,” Cung continued. 

Additionally, Vietnam should give priority to the facilitation of major free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU – Vietnam Free Trade Agreement (EVFTA), as well as the development of the private sector, he added. 

Nguyen Anh Duong, head of CIEM’s Macroeconomic Policy Department, said that there had been complex movements in Vietnam’s consumer price index (CPI), which decreased by 0.09% month-on-month in July and then increased by 0.45% and 0.59% in August and September, respectively. 

Overall, the CPI expanded 4.14% in the third quarter and 3.57% in the first nine months. Duong stated that the government’s inflation target of 4% in 2018 is feasible in face of inflationary risks at some points. 

With regard to the USD/VND exchange rate, there has been a gap between the USD selling price in the free market, the inter-bank exchange rate and the central bank’s benchmark rate. However, the State Bank of Vietnam (SBV) has adopted a more flexible management of the exchange rate in an effort to minimize potential negative impacts on the macro economy, Duong said. 

“Maintaining trade surplus and increasing the FDI disbursement rate are solutions to relieve pressure on exchange rate management,” Duong said. 

In summary, Duong expected the GDP growth rate in 2018 to reach 6.88%, while exports are set to grow by 13.34% with a trade surplus of US$5.1 billion. 

Meanwhile, the inflation rate is projected to reach 3.97%.

Looking forward, the CIEM’s director considered state budget performance a weakness of the economy as expenditures remain high, while spending efficiency still leaves much to be desired. 

Cung mentioned the US – China trade friction would bring both challenges and opportunities to Vietnam. However, Vietnam has to be active and prepared to adjust to new situations. 

Moreover, the global financial market in general and emerging markets in particular are vulnerable to the growing trend of protectionism and the volatile capital flows.  

Source: http://www.hanoitimes.vn/economy/2018/10/81E0CE02/global-uncertainties-continue-to-pose-threats-to-vietnam-economy-ciem/