(MPI) - On April 10th 2017, Asian Development Outlook (ADO) was launched in Hanoi, forecasting Vietnam’s economy to grow by 6.5% in 2017 and 6.7% in 2018, as a result of rising activity in manufacturing, construction, wholesale and retail trade, banking and tourism sectors.
The ADO notes that continued record levels of foreign direct investment will boost domestic manufacturing while at the same time helping to lift Vietnam’s export earnings even though global and regional trade flows will remain depressed. Vietnam’s rapidly expanding middle-class, which is expected to double in size by 2030 to 33 million, will also help to push up consumer spending and boost retail activity.
Manufacturing will be boosted by the continued opening of new foreign-invested factories on the back of record FDI disbursement last year. Manufacturing and exports should expand further with continued strengthening with the European Union through a new free trade agreement effective at the beginning of 2018.
Construction will continue to benefit from high FDI disbursements to set up new factories, a strengthening housing sector, and continued high public investment in transport and energy.
Growth in services, strong in 2016, is projected to remain so in 2017 and 2018 with tourist arrivals further boosted by the new e-marketing campaign launched recently by the Government.
Agriculture is expected to pick up somewhat in 2017 given the outlook for higher global food prices and assuming a return to normal weather. The Government targets agriculture growth at 2.8% in 2017. However, the report highlights that the sector continues to underperform relative to the rest of the Vietnam’s economy, dragging down overall growth.
Mr. Eric Sidgwick, ADB Country Director for Vietnam said that agriculture has been a significant driver of growth, poverty reduction, food security and exports since government began reforming the sector in the late 1980s. However, in recent years, in the face of growing international competition and low domestic labor productivity, the sector’s growth has slowed to an average of just 2% per annum since 2011. He also added that while Vietnam continues to address the worsening impacts of climate change on agriculture, deeper reforms and higher investment in the sector will be critical to boost agricultural productivity and long-run growth that is inclusive and environmentally sustainable.
The report highlights that agriculture output per worker in Vietnam is one-third of Indonesia’s and less than half of Thailand’s and the Phillipines’. The report also emphasizes that as Vietnam recovers from its most severe drought in a decade, boosting growth in the agriculture sector will be vital for Vietnam to achieve its aspirations of becoming an upper-middle income country.
The report stresses that to transform agriculture a number of major policy challenges will need to be addressed – including introducing greater competition into agricultural supply-chains and postharvest processing, developing rural infrastructure to support higher-value adding cash crops, adopting more sustainable natural resource management practices, and better integrating climate change considerations into policy making processes./.
Ministry of Planning and Investment