Viet Nam’s economy maintained impressive growth in the second quarter
this year, but risks are becoming more apparent, especially threats on
the exchange rate and interest rate.
The statement was made by Nguyen Duc Thanh, director of Viet Nam
Institute for Economic and Policy Research (VEPR) at a conference held
in Ha Noi on Wednesday.
“The impact of the US-China trade war has made the value of the
Chinese yuan (CNY), fall sharply against the US dollar. Viet Nam cannot
refrain from adjusting its exchange rate, thus creating a risk for the
enterprises,” Thanh told Viet Nam News.
Vietnamese inflation is starting to increase slightly; therefore, the
State Bank of Viet Nam (SBV) needs to control inflation to not exceed
five per cent.
With many large central banks tightening currency, together with the
risk of high inflation in the near term, the SBV may raise interest
rates for the dong to stabilise the exchange rate, Thanh added.
Such findings from a macroeconomic report released yesterday by VEPR
showed that the economy in Q2 saw growth rate of 6.79 per cent
year-on-year, the highest in ten years.
According to VEPR’s report, the agriculture, forestry, fishery and
service sectors continued to improve sharply. The industry and
construction sector also grew at a high rate of 9.07 per cent in the
first half of the year.
Manufacturing continued to drive the economy, while the mining
industry fell back to decline, reflecting the seasonal characteristic of
the positive growth in Q1.
Inflation surged in Q2, reaching 4.67 per cent at the end of June,
due to rising food and fuel prices. Meanwhile, core inflation remained
at 1.37 per cent, reflecting the SBV’s prudent monetary policy.
Trade growth slowed in the second quarter of this year; meanwhile
trade balance recorded a surplus in the fourth consecutive quarter and
reached US$1.4 billion in Q2. Notably, China regained its position as
the country with the highest trade deficit among Viet Nam’s trading
One noteworthy point in the VEPR study was that the number of
temporarily ceased enterprises was abnormally high, while the number of
new jobs declined.
Speaking at the report announcement, economist Pham Chi Lan raised
concerns about the decrease in employment rate due to the remarkable
rise of shuttered firms. In other countries such as the US, Europe or
Japan, the employment rate was always a top priority, however,
unemployment in Viet Nam had not received sufficient concern from
authorities, Lan said.
VEPR’s statistics also showed that Viet Nam’s budget balance returned
to a deficit in Q2, after a temporary surplus in Q1. Recurrent
expenditures continued to be higher than 70 per cent of total
expenditures, while development investment expenditures had not improved
In the second quarter, the country’s total retail sales of goods and
services increased in value but declined in volume over the same period
last year, reflecting a recovery trend in prices in 2018.
The report said that investment growth in the private sector was
strongest in all economic sectors. Meanwhile, newly registered foreign
direct investment capital in Q2 reached a record level. Japan was the
top investor in Viet Nam in the first six months of 2018.
The liquidity of the system was abundant due to the higher deposit
growth than credit growth, coupled with foreign currency purchases by
the SBV. Foreign exchange reserves continued to rise, reaching $63.5
billion at the end of Q2, the same level as the International Monetary
Another notable point from the report was that the real estate market
in Q2 declined in both Ha Noi and HCM City, both in new apartments for
sale and transactions.
Economist Pham The Anh attributed the gloomy real estate sector to
some factors such as the slow growth of the economy, instabilities in
exchange rate, consumer price index and the tension between the US and
“The potential risk of an increase in interest rates in the near
future could also push the real estate market down,” he told Viet Nam
VEPR’s report forecast that this year’s GDP growth target might clock
in at 6.8 per cent, higher than the 6.5 to 6.7 per cent goal set by the
National Assembly, as it forecast economic growth rates for the
upcoming quarters to reach 6.65 and 6.55 per cent, respectively.
The Viet Nam Annual Economic Report, published by VEPR, is a series
of annual reports summarising major economic issues in the previous
year, giving an outlook for the coming year and providing policy
The quarterly report was completed by the VEPR with support from the Konrad Adenauer Stiftung.