Vietnam’s gross domestic product (GDP) grew at the rate of 5.62% in 2014, much higher than the world average of 3.3%, mainly due to increased export activity by the FDI enterprises in the sectors of processing and manufacturing. This was revealed by International Monetary Fund’s (IMF) representative Sanjay Kalra at the Vietnam Economic Review 2014 & 2015 conference held by VPBank, today.
According to him, the exports from Vietnam touched $110 billion mark in the first nine months of the fiscal year. About 66 % of these were generated by enterprises that have set base in Vietnam through the by FDI (foreign direct investment) route. Their contribution to the country’s exports has risen by about 14 % year-on-year.
According to VPBank’s 2014 economic report, the main drivers of economic growth are the processing and the manufacturing sector, which continue attracting investment. With new registered and added capital of $7.7 billion as the end of September, the two sectors accounted for almost 69 percent of total FDI that has come to the country in the first nine months.
The real estate and the construction sectors also got strong FDI flows in 2014. Both the sectors registered a capital inflow of $1.22 billion and $ 612 million, marking an approximate increase of 107% and 319%, respectively (compared to the FDI Inflow in the sectors in the first three quarters, last year).
Although Vietnam’s GDP growth has been higher than the world’s average, it has not reached its maximum capacity, said Kalra, adding that Vietnam’s young demographic can be put to good use to achieve higher growth rate.
Vo Tri Thanh – deputy director of the Central Institute of Economic Management (CIEM) – added that although Vietnam economy had performed well in the first nine months, there are many difficulties ahead, in terms of achieving the Government’s objective of 6.2% growth in the GDP in 2015.
According to him, Vietnamese economy would be able to absorb only around $10 billion of the FDI in 2015. This limitation was mainly due to the lack of quality workforce and complex market condition.
However, the battle to achieve stable economic growth in the following years depended on the government policy, and the banking system. If banks would fund SMEs and startups with lower interest rates, domestic investment would therefore pick up, leading to increase in aggregate demand and supply, which in turns increases Vietnam GDP, he added.
“Vietnam officials should focus on stable rather than rapid economic growth, to achieve a same level growth next year” he said, adding that he was optimistic about economic growth next year due to developments that included signing of 6 free trade agreements (FTAs) with countries like the US, Japan, EU etc.