Services sector could boost Vietnam’s GDP growth to over 7% in 2019

The services sector in case of growing over 7.2% in 2019 could boost Vietnam’s GDP to be equivalent or even higher than last year’s growth of 7.08%, according to the Ministry of Planning and Investment (MPI). 

The country’s GDP grew by 6.79% in the first quarter, 0.14 percentage points lower than the government’s target. With such growth rate, the GDP growth for 2019 would reach 6.78% as long as the quarterly growth targets are met in the remaining quarters, according to the MPI’s report assessing the socio-economic development in 2018 and the prospect for 2019. 



Nevertheless, suchGDP growth of nearly 6.8% in 2019 would require a stronger push for greater efficiency in economic performance, especially in the industrial and construction sectors, stated the MPI. 



According to the report, the industrial and construction sectors remain the main driving force for economic growth, while consumer spending would be essential.



A diversion in capital inflow from China and other countries as a result of the current trade spat is expected to benefit Vietnam. Meanwhile, the Comprehensive and Progressive Trans – Pacific Partnership (CPTPP) will likely give a big push for the country’s institutional reform and greater competitiveness in exports, taking Vietnam to a higher position in the global value chain ladder. 



Major challenges



However, the MPI said the Vietnam’s economy continues to face major challenges which mainly arise from within, including the underperformed main driving forces and poor effects from monetary and fiscal stimulus measures. 



Additionally, the labor market is facing pressure from the Fourth Industrial Revolution with the risk of abundant labor supply with low skills and quality. 



A rapid urbanization process fueled by the rural-urban migration is putting pressure on the infrastructure, environment and social welfare, not to mention a widened gap between the rich and the poor, especially in the rural area.   



Growing uncertainties of the world economy, such as the US-China trade war, would cause a shift in global supply chain and the capital inflow to emerging countries, including Vietnam. 



Meanwhile, the participation in a number of new-generation free trade agreements requires Vietnam to fulfill its international commitments in opening markets such as protection of intellectual property and tax rate reduction, among others.