HANOI: Gross Domestic Product (GDP) growth is projected to increase modestly to 6.5 percent this year and 6.7 percent in 2018.
This is according to the Asian Development Bank (ADB)’s Outlook 2017, released in HàNội on Monday.
ADB country director for Việt Nam Eric Sidgwick said agricultural output was expected to pick up in 2017, given the outlook for higher global food prices and a return to better weather.
However, the sector continues to underperform relative to the rest of the Vietnamese economy, dragging overall growth down, he said.
Agriculture has been a significant driver of growth, poverty reduction, food security and exports since the Government began reforming the sector in the late 1980s. However, in recent years, in the face of growing international competition and low domestic labour productivity, the sector’s growth has slowed to an average of just 2 percent per annum since 2011.
Labour productivity is seen as key factor. The report highlights that agriculture output per worker in Vietnam is one-third of Indonesia’s and less than half of Thailand’s and the Philippines’.
The report stresses that to transform agriculture, a number of major policy challenges will need to be addressed, including introducing greater competition in agricultural supply chains and post-harvest processing, developing rural infrastructure to support higher value-adding cash crops, adopting more sustainable natural resource management practices and better integrating climate change considerations into policy making processes.
As Việt Nam recovers from its most severe drought in a decade, boosting growth of the sector will be vital for the country to achieve its aspiration of becoming an upper-middle income nation by 2030.
As for foreign direct investment (FDI), with record FDI in 2016 and new commitments, ADB says the disbursement is likely to rise in 2017 and 2018. In the first quarter of this year, the disbursement reached US$3.6 billion, up 3.4 percent from last year.
The outlook also highlights that as growth strengthens, inflation is expected to edge up to 4 percent this year and 5 percent next year. The expected rise in world food and fuel prices, higher US interest rates and a stronger dollar will add to imported inflation. Another likely source of inflation is the continued implementation of the Government roadmap on administered prices for education, health, electricity, water tariffs and minimum wages.
Merchandise exports are seen rising by an annual rate of 10 percent over the next two years as new foreign-invested factories start producing and new trade agreements take effect.
Public debt pressures have prompted the Government to set ambitious targets for the budget deficit, reining it to the equivalent of 3.5 percent of the GDP this year and holding it to some 4 percent next year. However, most of the reduction in the fiscal deficit would be due to higher receipts from the sale of equity in State-owned enterprises, which the Government treats as revenue.
On the expenditure side, the Government plans to cut recurrent expenditure by 6 percent while raising capital expenditure by 36 percent.