GDP growth forecast for 3 quarters is over 6%

“Agricultural and industrial production indexes in August 2017 were quite positive and we believe GDP growth in the third quarter and the first nine months of the year will be above 6%,” commented Mr. Nguyen Duc Hung Linh, Head of Research and Analysis Department of Saigon Securities Inc. (SSI).

Mr. Linh said that achieving this year's GDP growth target of 6.7% at all costs is unnecessary and that management policies should focus on stimulating supply instead of short-term stimulus solutions that contain risks.

Two emerging macro issues are of interest not only to researchers but also to investors, especially the fluctuations in inflation and credit growth. The CPI index in August unexpectedly increased by 0.92% compared to the previous month, the highest increase in nearly four years. The combination of price increases in many items such as food, gasoline, medical services, and tuition fees has pushed the CPI to nearly reach 1%/month.

Fruit and vegetable export turnover reached 2.35 billion USD for the first time in just the first eight months of this year. Photo TL

CPI in September is forecast to continue to increase due to the double increase in gasoline prices. Prices of medical services and education in many localities were also adjusted this month. Moreover, pork prices also increased due to demand from China.

Looking ahead to the next 12 months, inflation is likely to test the 4-5% level despite the CPI being below 4% this year. In addition to the above inflation-related factors, it can be seen that food price crises such as the rescue of pigs, watermelons, and other crops will be difficult to repeat.

The factor that affects inflation that cannot be ignored is credit growth. Excessive credit expansion can lead to macroeconomic instability if the path of disbursed capital is not well controlled. High credit growth is the shortest path to financial and economic crisis, which has happened twice in the past 10 years.

The sector expected to support GDP is exports as public investment disbursement is slow and banks are worried about bad debt outbreaks once many credit institutions have been allowed by the State Bank to raise their credit limit this year to over 20%.

Strong restructuring of agriculture and development of high-tech agriculture are being focused on because agriculture ranks second in GDP structure, just after manufacturing and processing industry. Exports of agricultural products have begun to show signs of hope when the export turnover of fruits and vegetables reached the milestone of 2.35 billion USD for the first time in just the first eight months of the year. While the export value of traditional products such as rice, coffee, rubber, cashew nuts, pepper, tea, etc. has not yet made a breakthrough, the export of fruits and vegetables is a suggestion for success if we do a good job of marketing.

The trend of investing in agriculture was initiated several years ago and is still attracting capital from domestic entrepreneurs. Enterprises in this field are either too new or have no intention of going public due to both objective and subjective reasons. Agriculture is one of the priority sectors for preferential loans, but agricultural growth is only at 2%/year. Capital is not the bottleneck. Risks in the consumption market and prices due to dependence on world prices are significant. Investment in processing to increase export value is still a weakness of Vietnamese agriculture.

According to Saigon Online