Vietnam can’t meet its goal for economic growth next year unless the government boosts domestic investment higher than its proposed target, legislator Tran Hoang Ngan said.
“The government’s target of 6.2 percent GDP growth for 2015 will be unrealistic if it doesn’t boost investment higher,” Ngan said in an interview on the sidelines of the National Assembly’s monthlong session which began in Hanoi today. “Unless the government can boost total investment to 33-35 percent of GDP, it will be very difficult.”
Policy makers are struggling to bolster an economy that the World Bank estimates will grow 5.4 percent this year, a seventh year of expansion below 7 percent. The government aims for domestic investment to reach 30 percent of gross domestic product in 2015, about the same level as this year, even as it takes steps to resolve bad debt at banks and privatize state firms, Prime Minister Nguyen Tan Dung told legislators today.
“It will be hard to boost domestic investment, especially from the private sector, given that companies are still struggling,” said Tran Dinh Thien, director of the Vietnam Institute of Economics in Hanoi. While the government has acted to quicken bad debt resolution, “clearly, it’s still slower than it should be,” he said.
The dong slipped 0.1 percent to 21,260 against the U.S. dollar. The benchmark VN Index climbed 0.7 percent at the close.
Vietnam is pushing ahead with its plan for restructuring state enterprises, with 71 such businesses selling shares in the nine months through September this year, compared to 74 for all of 2013, Dung said today. The government plans to reach a total of 200 companies by year-end, he said.
The country has resolved about 54 percent of bad debt in the banking system by using lenders’ loan-loss provisions, restructuring debt with borrowers, and through purchases by the state asset management firm, Dung said.
Vietnam’s economy expanded 5.62 percent in the nine months through September from the same period a year earlier, official data showed last month. The government’s target for full-year growth is 5.8 percent.
Some analysts have questioned the third-quarter GDP data and the government’s confidence in meeting its target. Economists Glenn Maguire and Eugenia Fabon Victorino at Australia & New Zealand Banking Group Ltd. wrote in a report last week that they are “skeptical of the strong growth print, as most economic indicators are pointing to weaker growth data compared to their expansion over the same period last year.”
Ngan said Vietnam’s economy has the potential to grow even faster than the government’s target.
“We need to restore confidence in businesses so that companies can join the government to increase investment,” said Ngan, who is also a member of the parliament’s economic committee. “We’ve sacrificed the past four years for macro stability, so it’s now time to prioritize growth.”