Growth in 2016-2020 unlikely to surpass 6%

Tuesday, Mar 10, 2015 08:10

VEPR also forecast that GDP will increase by about 6.2 per cent this year. — VNS Photo Ngoc Ha

HA NOI (Biz Hub) — The country's average annual economic growth rate for the 2016 to 2020 period is unlikely to exceed 6 per cent due to little improvement in growth motivation.

This has been forecast by a research group under the Vietnam Institute for Economic and Policy Research (VEPR).

The group said the high growth rate of 7.5 per cent seen during the 1990s and in early 2000s will not return going forward.

The institution noted that if there is no new growth motivation stemming from an improvement in labour productivity, it will make it difficult for the country's economic growth to avoid a long-term slippage.

It added that a credit growth of 12 to 15 per cent will help maintain an inflation target of 6 per cent. However, a credit growth of around 20 per cent will lead to a risk of high inflation (over 10 per cent).

To improve the growth rate and quality of the economy, research group VEPR stated that it is necessary to boost productivity of the total economy and restructure it for higher quality.

Innovations in economy and administration are also decisive actions, the group said.

VEPR also forecast that GDP will increase by about 6.2 per cent this year. This ratio is 0.2 points more than the estimated growth rate for 2014.

The inflation rate by the end of 2015 is expected to reach to 4.09 per cent, higher than 1.84 per cent in December 2014.

According to VEPR, the inflation rate has allowed the Government to adjust the prices of public services, including electricity prices. The increase in electricity prices will affect manufacturing costs, but will be limited to consumer prices.

In addition, if crude oil prices continue to decrease sharply, the balance in the economy will be affected. Therefore, the growth rate will possibly lose 1 to 1.5 percentage points, while the inflation rate will lose 4 to 6 percentage points, VEPR pointed out.

In the case of an easy monetary policy, combined with the sensitivity of consumers and investment with low interest, the growth rate could possibly increases by 0.1 to 0.2 percentage points, while the inflation rate will remain below the target of 5 per cent. — VNS

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