A slowdown in the first six months means it will be unlikely for Vietnam to achieve the economic growth target of 6.7 percent this year, a senior legislator has said.
Nguyen Van Giau, chairman of the National Assembly’s Economic Commission, said the economy cooled down due to a decline in agriculture, expanding only 5.52 percent in the first half, compared to 6.32 percent recorded in the same period last year.
He was speaking in Hanoi on Tuesday when his legislative committee reviewed the country's economic performance.
Some government officials have lowered their expectations.
“It is good if GDP can grow 6 percent in 2016, and it is very good if the growth reaches 6.3-6.5 percent,” said Minister of Finance Dinh Tien Dung. “But it is very difficult to have 6.7 percent.”
Missing the economic growth target will affect the government’s efforts to reduce overspending and public debt, he added.
The bank HSBC said in a recent report that Vietnam's exports continue to be buffeted by headwinds from weaker global demand but domestic demand will likely drive an acceleration of growth in the second half of the year.
“Vietnam's new leadership refrained from lowering the 6.7 percent 2016 GDP target in the face of the soft first quarter GDP numbers. The first half’s GDP numbers confirm our view that the target will be very difficult to achieve,” it said.
But authorities are likely to take steps to boost demand and spur investment, for example, by delaying the tightening of credit for real estate lending, the bank said. “We keep our 2016 and 2017 GDP forecasts unchanged at 6.3 percent and 6.6 percent, respectively.”
The good news is that restrained growth in the first half has helped drive a recovery in external balances and the trade balance is once again improving after deteriorating to a $3.6 billion deficit in 2015, HSBC said.
The bank also expected foreign direct to drive further gains in Vietnam's global export market share, allowing shipments to continue growing at a high-single digit pace even as global demand slows.
Disbursed FDI hit $7.3 billion year-to-date in June, marking a 15.1 percent year-on-year increase.