Agriculture may face difficulties in 2016

Economic statistics for the first two months of the year have sent out some positive signals and also warned of some problems in the coming time.

Positive signs

The first and most noticeable positive signal is that the consumer price index (CPI) in January did not increase, and in February it increased sharply, but overall the first two months of the year are still among the lowest compared to the same period of years from 2014 and earlier. This is a positive signal that the CPI for the whole year can be lower than the target of increasing below 5% and is the third consecutive year of low increase.

This is also an opportunity for market participants, from consumers, producers and businesses, to macroeconomic policy makers.

RATE OF INCREASE/DECREASE OF SOME MAIN ECONOMIC INDICATORS IN THE FIRST 2 MONTHS OF THE YEAR (%)

Source: General Statistics Office

In addition, the amount of foreign direct investment (FDI) increased both in registered capital (2.8 billion USD, up 135%) and realized capital (1.5 billion USD, up 15.4%). This amount of capital, combined with the increase in non-state capital (the registered business sector alone reached 113,000 billion VND in 2 months, up 45.8%) and the investment efforts from the state budget (2 months reached 25,283 billion VND, up 5.4%) will be a signal for the investment capital/GDP ratio to exceed 31%, along with improving investment efficiency, creating conditions for the implementation of the higher economic growth target according to the Resolution of the National Assembly.

If the country had a trade deficit of 1,413 million USD in the first two months of 2015 and a trade deficit of 3,538 million USD in the whole year of 2015, then the first two months of the year had a trade surplus of 865 million USD. Although the domestic economic sector still had a trade deficit, it decreased compared to the same period last year in both the trade deficit (2,097 million USD compared to 2,849 million USD) and the ratio of trade deficit to export (29.9% compared to 41.7%).

The trade deficit with China has decreased (from 5.2 billion USD to 4.7 billion USD, from Korea decreased from 2.97 billion USD to 2.6 billion USD; while the trade surplus with the US increased from 3.4 billion USD to 4.1 billion USD, from the EU increased from 2.65 billion USD to 3.4 billion USD. Although the foreign-invested sector's exports decreased sharply, it continued to have a trade surplus with a higher scale than the same period (2,962 million USD compared to 1,435 million USD). Trade surplus is not always good, trade deficit is not always bad, but in the condition of needing to achieve the general goal of primary importance, which is to stabilize the macro economy with the main contents being to improve the balance of payments, stabilize the exchange rate, reduce public debt, and foreign debt, improving the trade balance is a very important specific content.

The export turnover of the domestic economic sector accounted for 30.1% of the total export turnover of the country, higher than the proportion of the same period last year (29.7%) and higher than the proportion of the whole year 2015 (29.5%). There were 29 items reaching over 100 million USD - these are the items that promise to reach over 1 billion USD in the whole year 2016.

The number of international visitors to Vietnam in the first two months of the year, if the same period last year decreased sharply (over 10%), in the first two months of this year it increased quite significantly compared to the same period last year (16%). Along with the increase in remittances from the end of last year until now, a large amount of foreign currency has been brought into Vietnam, contributing to improving the balance of payments, increasing foreign exchange reserves and the VND/USD exchange rate has not increased as high as China and some countries that are major investment and trade partners of Vietnam. Thereby contributing to stabilizing and ensuring macroeconomic growth.

Noteworthy warnings

The index of industrial production (IIP) and the processing and manufacturing industry increased slowly, while that of the mining industry decreased, while the overall GDP growth target this year is higher than last year.

The slowdown in industrial growth is due to two main factors. The number of enterprises in general and industrial enterprises in particular that have gone bankrupt, dissolved, or temporarily suspended operations continues to be large, increasing and has been prolonged (in 2 months, the total number of dissolved enterprises was 2,195, up 6.8%; the number of temporarily suspended enterprises was 16,471, up 17.9%). Exports of the foreign-invested sector and many industrial products, if high last year, increased low this year, even decreased deeply.

Pepper for export. Illustration photo

Agriculture continues to struggle, even more so than in 2015, due to severe weather and falling exports.

The weather is harsh for all regions of the country. The North is experiencing severe cold, causing many cattle and cattle to die, and green vegetables for Tet are rare and expensive. The whole country, especially the South Central, Central Highlands, Southeast, and even the Mekong Delta, is experiencing a rare drought, not only crops and livestock but also people are lacking water, saltwater has penetrated deeply, and hydroelectric dams are lacking water.

Agricultural consumption is facing difficulties both domestically and for export, especially the export of coffee, tea, pepper, cassava, rubber, etc. has decreased sharply. This is a warning that the added value of agriculture, forestry and fishery this year will be the second year of low growth (last year it only increased by 2.41%).

The trade surplus was not due to high export growth, but mainly due to a sharp decrease in imports (down 6.4%) and slow export growth (2.9%). The decrease in imports was mainly due to a decline in domestic investment, production and consumption demand. The trade deficit with China decreased but remained large, while the trade deficit with Thailand, India, Malaysia, Brazil, etc. increased.

According to VGP