Unsatisfactory GDP leaves Vietnam in middle-income trap

Tran Thi Phuong Hoa, a NA deputy, pointed out that if Vietnam cannot obtain 6.7% growth rate, it will for the second consecutive year fail to implement the economic development plan. If so, the 5-year plan will be more challenging.

“In a long-term plan, if Vietnam’s economy cannot have average GDP growth rate of 7% per annum in 2016-2035, and the GDP per capita cannot reach 6% per annum, Vietnam will have no more opportunities to escape from the middle-income trap,” Hoa said.

Hoa suggested applying necessary measures to increase total demand. For example, Vietnam can increase the money supply. A 2% additional credit growth rate would not lead to high inflation because the core inflation is low, at 1.66% in the first quarter of the year.

However, in order to curb inflation, Hoa said, the government must not raise the electricity price and other public service fees, including healthcare and education, from now to the end of the year.

Lecturer of the Fulbright Economics Teaching Program, Nguyen Xuan Thanh, also pointed out that if Vietnam continues accepting low GDP growth, it will lag behind. 

“Since 1960, no country can escape poverty, become middle-income and then high-income if they do not have high GDP growth rates of 6% or higher for a long time,’ he explained.

“Low growth rates show inefficiency in using resources, direct and indirect,” he added.

Minister of Planning and Investment Nguyen Chi Dung, speaking before the National Assembly on June 9, mentioned the possibility of exploiting 1 million tons of oil to serve economic growth.

“It is good for the economy. We won’t overexploit, which leads to natural resources exhaustion,” he said, adding that the crude oil price has recovered in the world market.

However, NA deputies don’t agree. Pham Phu Quoc, a NA deputy from HCMC, said that the plan to exploit 1 million tons of oil showed unhealthy reliance of the economy on natural resources.

Dinh Duy Vuot, a NA deputy from Gia Lai, said that additional oil exploitation should be reconsidered.

“If Vietnam does not grow rapidly, it will lag behind other regional countries. In some aspects, we already lag behind, and we have to speed up,” said Minister of Planning and Investment Nguyen Chi Dung.

He said he agrees with economists that it is necessary to stabilize the macroeconomy and curb inflation. However, once Vietnam does this, it needs to accelerate development.