Vietnam’s GDP growth to slow after record performance in Q1

Vietnam’s decade high growth in the first quarter is forecast to slow during the rest of the year, a parliamentary meeting heard on Monday.

The country’s gross domestic product (GDP) grew 7.38 percent in the first three months thanks to strong performance in three key economic sectors, agriculture, industry-construction and processing-manufacturing, said deputy prime minister Truong Hoa Binh at the opening meeting of the 14th National Assembly, the highest legislative body in Vietnam.

However, the deputy PM pointed out that GDP growth is unlikely to maintain its momentum for the rest of the year and slow down instead due to lack of any breakthrough factors compared to last year.

In 2017, Vietnam’s economy expanded rapidly due to strong exports driven by South Korea’s electronics giant Samsung and Taiwanese steel firm Formosa.

The deputy PM expects this year’s main driver of growth to be processing-manufacturing, the most likely sector to see any breakthroughs.

Growth this year will be undermined by lower mining output, especially crude oil extraction which is forecast to be down by 2 million tons compared to 2017.

The reduced tax on some items imported from ASEAN countries is also believed to obstruct growth, deputy PM Binh said.

Vu Hong Thanh, chairman of the Economic Committee of the National Assembly, said high growth achieved in the first quarter has created a big challenge for the rest of the year if Vietnam is to aim for ever higher growth.

Thanh is also concerned about increasing healthcare, education and food prices, which are forecast to contribute 2-2.5 percentage points to this year’s inflation hike.

Protectionism and trade tensions between China and the U.S. have also affected Vietnam’s trade activities, Thanh said.

The committee asked the government to pay greater attention to growth quality, restructure the economy and to continue to closely monitor the situation, keeping adjustments to fuel, service and food prices in mind.

Vietnam’s annual trade now exceeds 185 percent of GDP, making it the second most trade dependent economy in Southeast Asia, behind Singapore, according to the Asian Development Outlook 2018 report released last month.

The Ministry of Planning and Investment has forecast country’s economic growth this year to be at 6.7 or 6.8 percent.