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News Analysis: Vietnam's annual GDP target under pressure as economic development faces headwinds

Xinhua, July 4, 2016 Adjust font size:

Vietnam is struggling to achieve its target of 6.7 percent economic growth in 2016 amid slow economic expansion in the first half of the year.

According to the country's General Statistics Office (GSO), Vietnam's economic growth in the first half of 2016 reached a low level of just 5.52 percent compared to 6.32 percent logged in the same period a year earlier.

In order to achieve the 6.7 percent GDP growth target for the whole year, economists maintain the country needs to post an economic growth rate of 7.6 percent in the six remaining months.

"This is a challenge as the country is facing numerous difficulties. If the government does not implement active measures it is very hard to fulfill the target of economic growth in 2016,"said Nguyen Bich Lam, general director of GSO, in an interview with Vietnam's state-run news agency on Monday.

As such, it will impact the plan of socio-economic development in 2016-2020 period, Lam said.

Growth of the country's agricultural, forestry and fishery sector saw a decrease of 0.18 percent year-on-year in the first half of 2016.

The slowdown in growth of the farm sector is attributable to the severe weather situation, including snow in the northern region and drought and saline intrusion in the south, especially the Mekong Delta, the main rice bowl of Vietnam, said the GSO.

The agriculture area alone is estimated to shrink 0.78 percent year-on-year in the first half due to the reduction of rice output.

Meanwhile, Vietnam's Index of Industrial Production is expected to rise by 7.5 percent year-on-year, lower than the 9.7 percent increase booked in the same period a year earlier, according to the GSO.

Regarding the GDP target, Vietnam's Ministry of Planning and Investment said during a regular cabinet meeting held last week in Vietnam's capital Hanoi that it is a relatively high growth level to reach, especially in the context of there being no more room for further easing of fiscal and monetary policies.

The decrease of economic growth, if it happens, will adversely affect other targets of expenditure and public debt, the ministry assessed.

The government's determination is to act drastically and prioritize handling bottlenecks to restructuring the economy in a practical manner, while creating a solid foundation for long-term growth, said Vietnamese Prime Minister Nguyen Xuan Phuc.

The prime minister put forward a series of measures in order to create"more room"for economic growth, including equitisation of state-owned enterprises (SOEs), SOE divestment, improving business climates, supporting farmers in restoring production and taking advantage of export markets as well as the domestic market.

The prime minister also requested the central bank to study the mobilization of capital, including money and gold held by the public.

While Vietnam has set a 6.7 percent GDP growth target in 2016, the World Bank has forecast that the country's GDP growth will stay at 6.2 percent. Endit