The economy as seen from Q1/2018: Encouraging signs.

For the reasons mentioned above, from the beginning of 2018, the Government and the Prime Minister directed all levels and sectors to seriously implement Resolution No. 01/NQ-CP on socio-economic development, striving to create a vibrant and efficient production and business atmosphere right from the start of the year. The Prime Minister and Deputy Prime Ministers inspected and urged the work in many ministries, sectors, and enterprises; attended investment promotion conferences in Phu Yen, Bac Lieu, Vinh Long, Nghe An, etc.

Vietnam also successfully hosted the 6th Greater Mekong Subregion Cooperation Summit and the 10th Cambodia-Laos-Vietnam Development Triangle Regional Cooperation Summit in Hanoi. People across the country, from North to South, from lowlands to highlands, entered 2018 with enthusiasm, confidence, and a spirit of hard work. Thanks to these combined efforts and strengths, the country's GDP growth rate reached 7.38%, the highest in the last 10 years, with balanced growth across all three sectors: agriculture, forestry, and fisheries increased by 4.05%; industry and construction increased by 9.7%, double the rate of the same period; and the service sector increased by 6.7%.

The macroeconomic situation is stable, agricultural production is recovering significantly, and industrial and service production continues its strong growth momentum, especially in the processing and manufacturing industries. Financial and monetary indicators, investment and development, business establishment, tourism services, and import-export activities all show considerable increases. The average consumer price index (CPI) in the first quarter increased by 2.82%, much lower than the average for the same period last year (4.96%); core inflation in the first quarter increased by 1.32%, lower than the same period last year (1.69%). Interest rates and the foreign exchange market are relatively stable, exchange rates fluctuate flexibly, foreign exchange reserves continue to increase, the gold market is stable, and the stock market is experiencing strong growth, with the VN-Index reaching over 1,170 points, an increase of 19%, and market capitalization estimated to have increased by 16.7% compared to the end of 2017, equivalent to 82% of the 2017 GDP.

Cumulative state budget revenue up to the end of March 2018 is estimated at over 308 trillion VND, equivalent to approximately 23.4% of the projected figure, an increase of 5.3% compared to the same period last year; state budget expenditure is estimated at 290 trillion VND, equivalent to approximately 19% of the projected figure, an increase of 1.7%. Total social development investment capital achieved a relatively high level, reaching 331.2 trillion VND, equivalent to 32.2% of GDP and an increase of 10.4% compared to the same period in 2017; of which capital from the non-state sector accounted for 41.9% and increased by 16.9%, and capital from the foreign investment sector accounted for 26.5% and increased by 8.1%. The investment and business environment continues to be attractive, attracting investment resources from society.

State budget investment is estimated to reach 48.7 trillion VND, an increase of 9.2% compared to the same period in 2017 (the increase in the same period was 3.6%).

Agricultural, forestry, and fisheries production increased in both quantity and value, making a positive contribution to overall growth. Agricultural restructuring is being implemented in the right direction, and many high-value key products are selling well, such as rice (up 23.8%), fruits and vegetables (up 35.6%), and cashew nuts (up 38.7%). The fisheries sector has shown significant improvement since the beginning of the year, with estimated seafood export value increasing by 11.2%.

The Industrial Production Index (IIP) rose sharply to 11.6%, with manufacturing increasing by 13.9%, continuing to be the main driver of overall growth, driven by key products such as electronics, computers, optical products, and metal production. Notably, the mining sector rebounded in the first quarter after two consecutive years of decline.

Total retail sales of goods and consumer service revenue in the first quarter are estimated at VND 1,048 trillion, an increase of 9.9% compared to the same period last year. The number of international tourists to Vietnam is estimated at 4.2 million, an increase of 30.9% compared to the same period, averaging 1.4 million per month.

In the first quarter, merchandise exports are estimated at US$54.3 billion, a 22% increase (compared to a 14.8% increase in the same period last year). Of this, the domestic sector increased by 18.9%, while the foreign-invested sector (including crude oil) accounted for 72.4% and increased by 23.2%. Processed industrial goods accounted for the highest proportion of total exports, approximately 83.3% and increased by 26.3%; agricultural, forestry, and aquatic products increased by 8.4%. Merchandise imports in the first quarter are estimated at US$53 billion, a 13.6% increase. The trade surplus was approximately US$1.3 billion. Social security was ensured. The fields of culture, sports, education, training, science, and technology all showed positive developments.

Besides the aforementioned positive aspects, the first quarter of 2018 also highlighted several issues that need addressing. The traffic safety situation was complex; while the number of traffic accidents decreased by 2.9%, the number of fatalities increased by 1.7% and the number of injuries increased by 18.2%. On average, during the first quarter, the country experienced 52 traffic accidents per day, resulting in 24 deaths and 14 injuries. Another worrying issue was the sharp increase in fires and explosions. As of March 15, 2018, the country had experienced 1,085 fires and explosions, resulting in 33 deaths and 66 injuries, causing hundreds of billions of dong in damage. These fires and explosions occurred in apartment buildings, markets, supermarkets, and industrial zones.

Regarding the global situation, in the first quarter of 2018, the world economy maintained good growth momentum. According to forecasts from international organizations such as the World Bank, IMF, and OECD, the global economy in 2018-2019 could grow by 3.9%; leading economies such as the US, the Eurozone, Japan, China, and India all showed optimistic growth rates. Global trade remained positive (above 4%), prices of basic commodities were stable, and oil prices tended to rise. However, the world economy in 2018 also faced potential risks and challenges: uncertainties arising from US policy adjustments; geopolitical issues continued to unfold unpredictably, notably tensions between the US and Russia, the UK and Russia, and the EU and Russia; the US-China trade war; and the increasing trend of populism and trade protectionism. Financial and monetary risks still show signs of being present, especially in global stock markets…

Based on the results and lessons learned from the first quarter of 2018, in the coming period, sectors, localities, and businesses need to focus on successfully implementing the goals and solutions.

Firstly, implement a cautious monetary policy, not aiming to boost economic growth by expanding credit, prioritizing interest rate stability, continuing to effectively control reasonable credit growth, and strictly managing consumer credit, real estate credit, securities, and household credit. Continue to strengthen fiscal policy by restructuring the state budget and public debt, reducing bad debts, expanding the tax base, combating tax evasion, and not focusing heavily on increasing tax rates; coordinate fiscal policy with monetary policy and other macroeconomic policies to neutralize foreign exchange, and strictly manage the amount of budget money in commercial banks; manage the capital market more proactively, especially in bond issuance which must be linked to actual needs.

Secondly, continue to implement a flexible and proactive exchange rate policy, preparing effective response plans for major shocks in the global financial and monetary markets; creating room and reducing pressure on exchange rate and monetary market management in the coming years. In the medium and long term, it is necessary to leverage the stable macroeconomic foundation to accelerate institutional reforms, restructure the economy, improve the investment and business environment, thereby enhancing the economy's resilience to major external shocks.

Thirdly, regular and frequent monitoring and supervision are essential to grasp the developments in the global and domestic economies, seize and fully utilize opportunities to promote rapid development in key sectors that drive economic growth, and make necessary adjustments when major changes occur.

Fourth, resolutely and synchronously implement the three strategic breakthroughs, creating clear and substantive changes in restructuring the economy associated with innovating the growth model, improving the quality of growth, labor productivity, and the competitiveness of the economy.

Fifth, expedite the allocation of capital plans and the disbursement of public investment funds; prioritizing the rapid disbursement of outstanding debts for basic construction, repayment of advance payments, and focusing on accelerating procedures related to construction, bidding, and settlement to speed up the disbursement process.

Sixth, focus on reviewing and rectifying traffic safety and fire safety, especially at key traffic points and accident-prone routes; strengthen inspections of fire prevention and fighting work in apartment buildings, markets, supermarkets, schools, and hospitals, and strictly handle violations.

The socio-economic development situation and results in the first quarter of 2018 are creating a foundation for successfully achieving the annual GDP growth target of 6.7%, and possibly higher. The important and long-term task for our country is to continue restructuring the economy, improving the quality of growth, increasing labor productivity and the competitiveness of the economy, ensuring macroeconomic stability, social security, and sustainable development. It is necessary to continue to do a good job in directing, managing, inspecting, and supervising; to significantly and comprehensively improve the investment and business environment; to quickly remove all difficulties and obstacles faced by businesses and people; and to proactively implement new generation free trade agreements, especially the CPTPP, creating new impetus for the national economy.