Vietnam seeks 6.5% growth through 2025 after missing current goal

Hanoi eyes regional supply chains after pandemic derailed GDP target for 2016-20

Vietnam looks to propose a five-year economic plan targeting growth of 6.5% to 7% for 2021-25, aiming to boost per-capita GDP to $4,700 from this year’s estimate of $2,750.

The plan will be finalized when the Communist Party of Vietnam holds a convention in January, at which party members will confirm a new leadership lineup and an economic growth strategy for the next five years.

The Ministry of Planning and Investment proposed average gross domestic product growth of 6.5% to 7% for the five years as it held a work session Sept. 29. The session also cited a target of GDP per capita of $4,700 to $5,000 by 2025.

The proposal comes as Vietnam missed the targets in the 2016-20 plan.

“The average growth rate of the five years from 2016 to 2020 is estimated at about 5.8%,” falling short of the 6.5%-7% target, according to Dautu, a state media source under the influence of the planning ministry.

Vietnam’s GDP is estimated at $269 billion this year, up roughly 40% from $193 billion five years ago. Per-capita GDP is estimated at $2,750, growing 30% over five years from $2,109.

Tran Quoc Phuong, deputy minister of planning and investment, said during the work session that Vietnam has achieved many socioeconomic goals. But he acknowledged that four targets have not been met: GDP growth, GDP per capita, the rate of trained labor in the workforce and the unemployment rate in urban areas.

GDP growth covering 2016-19 averaged 6.8%, Phuong said. But Vietnam’s economy was hit hard by the coronavirus pandemic this year. While many neighboring countries have negative growth forecasts, Vietnam is expected to remain in positive territory with a rate of about 2%, Dautu reported. But the slowdown in 2020 reduced average GDP growth over the five years to 5.8%.

“In the first four years, the economy performed quite smoothly, but the final year [2020] was unpredictable and unimaginable,” Phung Quoc Hien, vice chairman of the National Assembly, Vietnam’s parliament, said during the meeting. “COVID-19 upended the environment.”

“[The slowdown in] 2020 is due to the influence of COVID-19, so it is force majeure,” said Nguyen Chi Dung, the minister of planning and investment. But he also said the pandemic’s impact needs to be appreciated not only in assessing the past five years but also in preparing the next five-year plan.

The growth target proposed for the 2021-25 socioeconomic plan is just the initial sketch, as Hanoi illustrates an economy led by manufacturers and digital elements. Vietnam seeks to become a new hub of a regional supply chain benefiting from trade and tech tensions between the U.S. and China.

“The overall goal is to achieve a higher economic growth rate than the five-year average of 2016-2020, and by 2025 cementing a position as a developing country with modern industrialization, surpassing low middle income economy,” the planning ministry said in the meeting.

But Vietnam has failed to reach GDP growth targets for three consecutive five-year periods. The economy missed the targets of 7.5% to 8.0% for 2006-10 and 7.0% to 7.5% for 2011-15, delivering 7% and 5.9% growth during those periods, respectively.

The country achieved 7.51% growth for 2001-05, hitting its target of 7.5% to 8.0%.

The new five-year plan will be the eighth since the Communist Party adopted Doi Moi in 1986 — reforms aimed at achieving a socialist-oriented market economy.

Attendees at the ministry’s work session agreed on the need to formulate and carry out the socioeconomic goals carefully.

“In 2021, the situation is still going to be very difficult,” Hien said.

By Tomoya Omoya – Nikkei Asia Review – October 5, 2020