Vietnam economy sees strongest growth rate after 8 years

Vietnam Economy grows 7.08% over the past 6 months

The GSO (General Statistics Office) has recently announced that Vietnam economy has recorded the highest six-months growth rate since 2010, at 7.08% from this January to June. Several reasons for this strong growth can be attributed to the improvement in the manufacturing, service, and agriculture industry in this year’s second quarter (April to June). This is evident when comparing these sectors’ year-on-year growth as data show that these three sectors have grown 6.79% from the first half of last year to this year’s.

According to the data released by GSO, the country’s processing and manufacturing industries saw a 13% growth during this period. One main reason for this strong growth is due to the rise in production output from major manufacturing companies like Samsung and Formosa. This is especially true for Samsung as Vietnam is set to become their main smartphone production site, with the company currently having one research and development center and eight factories in Vietnam.

The country’s decreasing mining output is also seen to be slowing down, compared to past periods with fast output decline.

What’s more, although Vietnam economy saw its imports increase by 10% ($111.2 billion), they also saw its exports expanding by 16% ($113.9 billion) after one year, leaving the Vietnam economy with a $2.7 billion surplus in the first half of 2018. 

Potential risks for Vietnam economy in the following months

Despite high economic growth in the first half, not all six months showed positive growth. Based on the same report, there were trade deficits in May and June, unlike the trade surplus from January to April. According to GSO general director Nguyen Bich Lam, this was due to the rise in imports from countries with FTA (free trade agreements) with Vietnam.

Furthermore, the country is expected to experience declining manufacturing and mining output in the second half of 2018 as a result of unfavorable weather conditions for mining and slowing growth for big manufacturing companies.

As such, Vietnam economy is targeting its 2018 and 2019’s growth rate to be at 6.7%.

Recommended actions to ensure sustainable growth

To ensure the economy’s stable growth, the ADB (Asian Development Bank) recommends Vietnam to boost its efforts of lowering its skill gap. Skill gap is the difference between a worker’s qualifications and a business’s required skills. This recommendation comes after the fact that its skill gap has been widening as the country develops, which can hinder Vietnam economy from growing to its full potential unless it’s resolved promptly. 

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