A customer at an electronics showroom.The National Financial Supervisory Committee said weak consumer demand is holding back the Vietnamese economy. Photo courtesy of Saigon Giai Phong
The National Financial Supervisory Committee has said the government should take strong measures to boost consumption and investment if the year's 5.5 percent growth target is to be achieved.
In a review of the economy in the first half, the committee said there are signs that production has picked up, but it needs a push, news website Voice of Vietnam reported.
Industrial output has been increasing since March, with imports of feedstock and raw materials in the first half rising by 17.8 percent over the same period last year, and inventories have shrunk from 21.5 percent on January 1 to 8.8 percent six months later.
Exports rose by 16.1 percent, with Vietnamese companies reporting 2.2 percent growth.
Incorporation of new companies was up 8.4 percent year-on-year in the first seven months.
Around 10,000 business that had suspended operations have also reopened.
The financial market has also improved.
But recovery is not firm yet given the diminished purchasing power and high production costs.
Meeting the 5.5 percent growth goal would be a "big challenge," the committee said. In the first half GDP growth was 4.9 percent, around the same as last year.
It said since inflation has been contained and is highly likely to end below the target of 6.5 percent, the government should now give priority to growth.
Consumer price index in the first seven months rose 2.68 percent, mostly due to the stronger dollar and fuel price hikes, but still a multi-year low, the committee said.
The economy has achieved some stability and begun to win back confidence among foreign investors, according to global credit rating agencies, it said, asking the government to raise spending on major construction works by issuing bonds.
In June and the first half of July foreign investors bought around $450 million worth bonds and nearly $100 million worth shares in the Vietnamese market.
But the problem of weak local demand is still a major one and requires carefully drafted policies to revive confidence, the committee said.
With not much time left until the end of the year the government needs to support production in any manner possible and ensure any power and fuel price hikes are moderate.
GDP growth was 5.03 percent last year, much lower than the target of 6-6.5 percent and the lowest rate in 13 years.
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