Vietnam sets high GDP target in 2021 to make breakthroughs

While a GDP growth target of 6.5% in 2021, 0.5 percentage points higher than the goal set by the National Assembly, would no doubt put the government under pressure to take actions, but is necessary to create breakthroughs for development in subsequent years.

Prime Minister Nguyen Xuan Phuc at Foster Company in VSIP Bac Ninh Industrial Park in May, 2020. Photo: Quang Hieu.

“This comes on the fact that 2021 is the first year of Vietnam’s five-year socio-economic development plan (2021-25), but also a golden time for the country to take on new opportunities,” stated Minister of Planning and Investment Nguyen Chi Dung.

In 2021, the world economy continues to face four major challenges, including the complicated Covid-19 situation globally; tech and trade tensions between major powers; geopolitical risks; and volatility of international financial markets.

“In this context, a 6% GDP growth target for Vietnam remains ambitious, let alone a 6.5%,” economist Tran Dinh Thien said.

“However, there are reasons for Vietnam to be optimistic,” Mr. Thien noted, saying Vietnam continues to enjoy positive impacts from free trade agreements, including the EVFTA, RCEP and most recently, the UKVFTA.

Mr. Thien also pointed to the ongoing global shift of investment capital, Vietnam’s current efforts in digital transformation and promoting e-commerce, as well as the dynamic and abundant workforce.

“If Vietnam can address current internal issues and grasp opportunities with both hands, there is a high chance that Vietnam can attain the high GDP growth target in 2021 and for the 2021-25 period,” he suggested.

To realize these targets, Vietnam must continue to restructure the economy by revising its growth model based on science, technology, innovation, and working towards higher productivity, economic competitiveness and resilience against external shocks, Mr. Thien asserted.

“The Vietnamese government targets the digital economy to contribute 20% of the GDP by 2025, which would require strong efforts from both the government and local provinces/cities,” he added.

Along with that target, the government sets sight for the total factor productivity (TFP), which is determined by how efficiently and intensely the inputs are utilized in production, to contribute by 45-47% of the GDP and productivity growth of 6.5% per year, goals that Mr. Thien said are difficult even in the conditions of the pre-Covid-19 period.

“A developed digital economy, nevertheless, could boost the TFP and productivity to a new level,” stated Minster Dung.

The government is committed to further supporting the development of an ecosystem for innovative startups, including incentive policies and favorable access to financial resources, added Mr. Dung.

Further support for business community

Head of the Prime Minister’s Economic Advisory Group Nguyen Duc Kien said the Vietnamese economy is on the right direction for rapid and sustainable development by focusing on improving the institutional framework, human resources and infrastructure system.

In a difficult year with Covid-19, Vietnam gives priority to stabilizing the macro-economic conditions and providing support for the business community.

In the first quarter of 2020, the number of enterprises resuming operation stood at 14,800, down 1.6% year-on-year, but was on steady growth to 8.2% year-on-year in the second and third quarter.

As of November 2020, 40,800 businesses resumed operation, up 10.7% year-on-year, taking the total number of newly established and those resuming operation in the 11-month period to 165,100, up 0.9%.

Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc said the business community expected stronger support from the government to help them better recover from the pandemic.

“Effective government support program and enterprises’ own efforts could lead to a more positive business performances in next year and contributing to the overall growth,” stated Mr. Loc.