Thanh made the forecast at a workshop updating Vietnam’s macroeconomic performance in the fourth quarter of 2018 and the entire 2018, which was held in Hanoi on January 10.
However, the economist forecast that inflation in 2019 will surpass the target of below 4% to reach 4.28%.
He added that Vietnam’s economic growth prospects in the long term will continue to depend on the foreign direct investment (FDI) sector, in addition to the results of removing institution barriers, the improvements of the business environment and the equitisation of State-owned enterprises.
Thanh noted that the use of foreign exchange reserves to stabilise the value of the Vietnamese dong as the State Bank has implemented over the past few years is not a long-term solution because Vietnam’s foreign exchange reserves remain small in scale.
When production and supply chains move from China to neighbouring countries due to the impacts of the US-China trade war, VEPR believes that Vietnam needs to improve the institutional and business environment, in addition to labour quality, in order to seize this opportunity.
However, Vietnam is anticipated to encounter huge challenges as the infrastructure is not ready to receive the wave of production movement, as well as disadvantages of scale compared to China and India.