Vietnam could beat China on GDP growth in 2016: expert

Vietnam’s economy has the chance to expand at a faster pace than that of China in 2016, and what matters is whether the country can grab the opportunity, an economist has said.

>> A glance at Vietnam’s economy in 2015

A stronger growth than China’s will also enable Vietnam to become East Asia and Southeast Asia’s fastest-growing economy, Dr. Nguyen Xuan Thanh, director of the Fulbright Economics Teaching Program in Ho Chi Minh City, told Tuoi Tre (Youth) newspaper in an interview published Saturday.

Vietnam posted a GDP growth of 6.68 percent in 2015, whereas China’s economic growth is expected to cool from 7.3 percent in 2014 to 6.9 percent in 2015, its slowest pace in 25 years, according to the Chinese central bank.

“Vietnam is approaching near China on GDP growth, and the chance is the Chinese economy is also forecast to grow slower in 2016,” Thanh said.

China’s growth could ease further to 6.8 percent or 6.3 percent in 2016, according to respective forecasts by its central bank and Oxford Economics.

Thanh said China’s growth this year could be only 6.4 percent, and many regional countries will be affected by the slowing Chinese economy, except for Vietnam.

“[We] have recently signed many free trade pacts, which are all going to take effect, and these trade accords will be great stepping stones for further economic growth if we know how to take advantage of them,” he elaborated.

“In 2016 if Vietnam continues to be able to stabilize its macro-economy, the GDP can grow by 6.8-7 percent, which will enable the country to beat China on GDP growth for the first time since 1986.”

Vietnam sets a GDP growth goal of 6.7 percent for 2016, according to a resolution approved by the lawmaking National Assembly in November 2015.

Thanh also expressed his belief that Vietnam will be able to maintain such a healthy economic growth for the next five years, if it can improve confidence of consumers and resolve difficulties of businesses.

“But in the longer term, Vietnam still has to launch a reform of economic institutions and economic restructuring to ensure a sustainable growth,” he noted.

In 2015, Vietnam signed four significant trade pacts, which all help expand the country’s export markets.

The deals include the Trans-Pacific Partnership (TPP) agreement with the U.S. and ten other nations in the Pacific Rim, the free trade agreement with the Russia-led Eurasian Economic Union, and the trade accords with the Europe Union and South Korea.

The trade pact between Vietnam and South Korea came into effecton December 20, whereas both the trade deals with the EEU and EU are scheduled for implementation in 2018.

The TPP, meanwhile, is pending ratification by 12 member nations before entering into force. The process is expected to begin in Vietnam in mid-2016.

Thanh said such deals will help the country attract more foreign investment, both direct and indirect, in 2016.

“The improved global economy in 2016 will also leave positive impacts on Vietnam,” he added.

Local businesses, particularly those operating in the manufacturing and production industries, will also have a chance to cut input costs if oil prices, as well as steel, food and other metal prices, remain low as in 2015, according to the economic expert.

However, Vietnam will still have to face several challenges in 2016, especially in the respect of banking, forex management and real-estate, he warned.

While Vietnam has exerted efforts to restructure the banking sector, what it has done so far is being able to ensure stable liquidity in a short term, Thanh said.

“Weak banks remain the biggest risk for the economy this year, and it is not likely that lending interest rates will be cut,” he elaborated.