Khóa luận tốt nghiệp Ngoại ngữ: Vietnamese GDP in the Period of 2007 - 2016

LIST OF ABBREVIATION ABBREVIATION FULL NAME WTO World Trade Organization GDP Gross Domestic Product SOEs State-owned Enterprises WEF World Economic Forum ASEAN Association of Southeas

INTRODUCTION

Rationale to the thesis

In recent years, Vietnam has made significant progress in its industrialization and modernization efforts, with 59 countries recognizing its economy as a market economy, including key trading partners The nation has successfully signed 10 regional and bilateral free trade agreements, comprising six as an ASEAN member and four as an independent entity Additionally, Vietnam has concluded negotiations for two FTAs with the European Union and TPP, while actively pursuing negotiations for three more FTAs, including ASEAN-Hong Kong, EFTA, and RCEP.

The soaring inflation rate, financial depression, and real estate market collapse have caused imbalances in GDP growth GDP serves as a crucial indicator for strategic economic development and macroeconomic policy goals To stabilize growth, the government has introduced various measures, including demand-stimulating policies and strategies to reduce bad debts However, addressing these challenges necessitates in-depth analysis, making it essential to learn from real-world experiences to inform strategic planning for the future.

Arriving from factual demand, the thesis of “Vietnamese GDP in the period of 2007-2016” is carried out to deal with following issues:

 Definition, components and factors affecting GDP

 Accomplishments and constrains of the Vietnamese economy in the period of 2007-2016

 Solutions that the government conducted to face the problems

Pham Lan Huong – K17ATCB Page 2

The scope of the study

This study analyzes GDP and its growth rate from 2007 to 2016, aiming to identify effective strategies for enhancing GDP growth The author utilizes various sources, including websites, news articles, and other research, to support the analysis As a result, recommendations are provided for the government to consider in efforts to improve the economy.

Research methodology

To have an overview of Vietnamese economy, the author has used some methods:

 Collecting and analyzing data and information from Ministry of Finance’s website, General Statistics Office’s website, specialist journals and other researches

 Making analysis and synthesis basing on actual data.

Structural organization of the thesis

Along with the introduction part, the thesis is divided into four chapters

Chapter II : Background knowledge Chapter III : GDP growth rate in Viet Nam from 2007-2016 Chapter IV : Solutions of the government

BACKGROUND KNOWLEDGE

Definition of GDP

Gross Domestic Product (GDP) is defined as the total monetary value of all finished goods and services produced within a country's borders during a specific time frame Typically calculated annually, GDP can also be assessed quarterly, with the U.S government providing annualized estimates for each quarter It encompasses all forms of consumption, government expenditures, investments, private inventories, construction costs, and the balance of trade, where exports are added and imports are subtracted.

According to N Gregory Mankiw's "Macroeconomics" (7th edition), GDP is widely regarded as the most effective indicator of economic performance Calculated quarterly by the Bureau of Economic Analysis, a division of the U.S Department of Commerce, GDP relies on extensive data from various sources These sources include administrative data derived from government activities such as tax collection and regulation, as well as statistical data from surveys of retail, manufacturing, and agricultural sectors Ultimately, GDP consolidates these figures into a single number that reflects the dollar value of economic activities over a specific period.

Components of GDP

Economists and policymakers not only emphasize the overall output of goods and services in the economy but also consider how this output is distributed across various uses The national income accounts categorize GDP into four main types of spending.

Thus, letting Y stand for GDP,

Gross Domestic Product (GDP) is calculated as the total of consumption, investment, government spending, and net exports Every dollar contributing to GDP is categorized within these four components This relationship is defined as an identity, meaning it is always true based on the definitions of the variables involved.

It is called the national income accounts identity

Consumption encompasses the goods and services purchased by households, categorized into three main types: nondurable goods, durable goods, and services Nondurable goods, like food and clothing, have a short lifespan, while durable goods, such as cars and televisions, are designed to last for an extended period Additionally, services refer to the work performed for consumers by individuals and businesses, including activities like haircuts and medical consultations.

Investment refers to the acquisition of goods intended for future utilization and is categorized into three main types: business fixed investment, residential fixed investment, and inventory investment Business fixed investment involves firms purchasing new plants and equipment, while residential investment pertains to households and landlords acquiring new housing Additionally, inventory investment reflects changes in the stock of goods held by firms, with an increase indicating positive inventory investment and a decrease representing negative investment.

Government purchases refer to the acquisition of goods and services by federal, state, and local governments, encompassing items like military equipment, infrastructure such as highways, and services rendered by government employees It is important to note that this category excludes transfer payments to individuals, including Social Security and welfare benefits.

Pham Lan Huong – K17ATCB Page 5 transfer payments reallocate existing income and are not made in exchange for goods and services, they are not part of GDP

Net exports represent the balance of trade with other nations, calculated by subtracting the value of imports—goods and services purchased from foreign countries—from the value of exports, which are goods and services sold to other countries.

Net exports occur when the value of exports exceeds imports, resulting in a positive balance, while a negative balance arises when imports surpass exports This metric reflects the net spending from foreign markets on domestic goods and services, generating income for local producers.

Classification of GDP

Real Gross Domestic Product (GDP) is an economic indicator that measures the value of goods and services produced within a specific financial year, adjusted for changes in the general price level By accounting for inflation or deflation, Real GDP provides a more accurate reflection of an economy's performance and purchasing power.

Real GDP is measured using fixed prices from a designated base year, allowing for an accurate reflection of economic output at constant prices This measurement serves as a reliable indicator of a country's economic growth, as it focuses solely on production while excluding the effects of price changes and currency fluctuations.

Nominal Gross Domestic Product (GDP) refers to the total monetary value of all economic output produced within a nation's borders during a specific financial year, measured in absolute terms without adjusting for inflation It reflects the GDP at current market prices, representing the raw economic data before any inflationary factors are considered.

Factors affecting GDP

Technological advancements have led to increased productivity across most industrial nations, allowing workers to enjoy more leisure time This additional leisure facilitates greater engagement in recreational and cultural activities, enhancing overall well-being However, since these extra hours of leisure are not accounted for in market transactions, they do not contribute to GDP figures.

In today's world, human resources are increasingly acknowledged as a crucial element alongside capital and technology that drives economic growth To successfully integrate into both regional and global economies, it is essential to develop a workforce that meets the evolving demands of development at both levels.

Economically significant activities are typically transacted in the market, with certain exceptions like government services being excluded from GDP calculations Non-marketed economic activities, such as unpaid housekeeping and voluntary services—including free educational support for underprivileged children—are not accounted for in GDP despite their contribution to social welfare The challenge in estimating their market values leads to their omission from economic assessments, highlighting a gap in measuring true economic impact.

The underground economy encompasses a range of unofficial activities, including both legal and illegal services such as informal nursing, house cleaning, and child care, as well as organized crime Many workers, like house cleaners and plumbers, often receive cash payments for their services, highlighting the prevalence of cash transactions in this sector.

Pham Lan Huong – K17ATCB Page 7 transactions go unnoticed by the tax authorities However, such activities have a welfare implication No doubt, they may enhance or reduce social welfare

The underground economy significantly impacts global financial systems, accounting for up to one-third of the total economy in developing countries and over 10% in developed nations In the UK, incorporating even a fraction of this hidden economy could boost the GDP by around 4% Following the 2008 financial crisis, the worldwide underground economy has expanded dramatically, contributing trillions of dollars to the global economy.

Finite natural resources, such as oil, are often neglected in GDP calculations, leading to a misleading economic picture When oil is extracted today, it reduces the availability of this resource for future generations, yet this crucial aspect is not accounted for in GDP metrics.

Natural resources play a crucial role in facilitating capital accumulation and promoting stable development For many countries, capital accumulation is a lengthy process that is intricately linked to domestic consumption and foreign investment However, nations endowed with abundant and diverse natural resources can expedite this process by either selling raw materials or diversifying their economies to generate additional capital This resource wealth serves as a foundation for the country's industrialization and modernization While resource-rich countries can experience stable growth, those with fewer resources must navigate the challenges of price fluctuations in imported raw materials.

Despite a rise in per capita income, poverty levels in India have increased, leading to a decline in social welfare Over the past 56 years, even with satisfactory economic growth, planners have struggled to effectively address and reduce poverty in the country.

Despite recent financial assistance from the World Bank and IMF leading to some progress in reducing poverty, income inequality has actually worsened, even as economic growth rates have improved.

Gross Domestic Product (GDP) measures the total value of goods and services produced and sold in an economy, yet it does not indicate how these resources are distributed among the population Consequently, two nations can have the same GDP while exhibiting significant disparities in economic welfare distribution.

Economic satisfaction is influenced not only by an individual's absolute economic position, such as the quantity and quality of food, clothing, and shelter, but also by relative comparisons to others The concept of standard of living encompasses a wider range of factors than GDP, as it considers all aspects that impact people's well-being, regardless of whether those elements are traded in the market.

To highlight the disparity between GDP and the standard of living, it is essential to identify aspects that GDP overlooks, which are crucial for assessing overall quality of life.

Limitations of measuring GDP

GDP fails to account for the quality of goods and services, nor does it reflect the quality of life they provide, overlooking critical issues such as environmental degradation This limitation poses a significant challenge for Vietnam, which, despite recent economic growth amid a sluggish global economy, faces escalating concerns about environmental pollution Recent assessments reveal that pollution levels in Hanoi rank among the highest worldwide, highlighting the unsustainable nature of rapid economic growth and the deteriorating urban living conditions Notably, the environmental crisis triggered by Formosa's pollution has severely impacted the Central Coast, with ongoing repercussions for public health.

GDP accounts for expenditures on environmental protection, healthcare, and education; however, it fails to reflect the actual conditions of environmental cleanliness, health outcomes, and educational attainment While GDP includes investments in pollution-control equipment, it does not measure the resulting air and water quality Additionally, GDP considers medical spending without indicating changes in life expectancy or infant mortality rates Similarly, it reflects educational spending without directly assessing literacy and numeracy levels within the population.

Economic activities often generate externalities that are not captured in GDP measurements, leading to a distorted view of progress For instance, while constructing a hydroelectric dam may boost GDP, it simultaneously harms rivers, aquatic ecosystems, and surrounding forests, effects that GDP fails to account for Additionally, the resulting flash floods and disruptions from such projects can lead to significant tragedies and economic losses, yet these consequences remain unrecognized in GDP figures.

Pham Lan Huong – K17ATCB Page 10 number of kW generated by the hydropower project and its growth in the electricity sector

While GDP includes spending on recreation and travel, it does not account for leisure time There is a significant distinction between an economy that thrives due to long working hours and one that achieves similar size through increased productivity, allowing individuals to work fewer hours.

GDP measures market-exchanged production but excludes non-market activities, such as household tasks For example, hiring someone for lawn care contributes to GDP, while doing it yourself does not A significant shift in the U.S economy since 1970 is the increase in women's participation in the paid labor force, rising from 42% to nearly 60% by the 2000s, according to the Bureau of Labor Statistics This influx of women into the workforce has led to a transition of services like food preparation and childcare from the non-market to the market economy, resulting in an inflated GDP figure despite no actual increase in service consumption.

GDP is not a reliable indicator of societal inequality, as a 5% increase in GDP may reflect uneven growth among different groups, with some experiencing greater gains while others may see declines Additionally, GDP fails to account for the diversity of goods available; for instance, it does not differentiate between consuming 100 identical chocolate cakes or a variety of cakes made from different ingredients It merely measures the total expenditure on cakes, disregarding the choices and variety available to consumers.

Excessive focus on GDP as the sole indicator of economic health can lead to short-term growth at the expense of long-term sustainability, resulting in environmental degradation and diminished future growth prospects.

GDP does not accurately reflect the availability of technology and products or the true standard of living For instance, between 1900 and 1950, people's quality of life was influenced not just by their income but also by their purchasing power A rising GDP is not always indicative of progress; for example, after a hurricane devastates a city, the subsequent construction boom does not mean the disaster was economically beneficial Similarly, increased spending on security measures due to rising crime fears does not equate to an improved quality of life Additionally, the sale of certain goods, such as pornography or violent films, may not contribute positively to society's overall standard of living.

The rise in GDP often underrepresents the true improvement in the standard of living in the United States Over the past century, the average workweek has decreased from around 60 hours to less than 40, while life expectancy, health, and education levels have significantly improved Since 1970, air and water quality have generally improved, and advancements in technology have enhanced entertainment, travel, information access, and healthcare Additionally, the variety of basic products, such as food and clothing, has greatly expanded Since GDP does not account for factors like leisure, health, environmental quality, technological advancements, or increased variety, the actual enhancement in Americans' living standards has outpaced GDP growth in recent decades.

GDP IN VIET NAM FROM 2007 TO 2016

GDP growth rate in the period from 2007 – 2010

(Source: General statistic office of Viet Nam)

The third graph shows GDP growth rate in quarters of Viet Nam from 2007 to

In 2012, the first quarter of the year showed slower development compared to other quarters, a trend that generally persists, except for the notable GDP growth rate in 2008 Overall, the GDP growth rate has been on a downward trajectory, with 2007 marking a peak in growth rates when compared to subsequent years.

In the initial two years from 2006 to 2007, Vietnam made significant strides in its development process, achieving notable successes despite facing high inflation and economic recession By the second quarter of 2007, the country managed to stabilize its macroeconomic environment while maintaining an impressive average growth rate of 7% during the 2006-2010 period These advancements led to substantial improvements in socio-economic development, as reflected in key performance indicators across various major sectors.

Figure 3: GDP growth rate in quarters of Viet Nam from 2007 to 2012

The scale and production capacity of all sectors increased GDP of 2010 (estimated at US $ 101 billion) was 3.2 times more than 2000 (US $ 31.2 billion)

Vietnam has achieved a significant milestone by becoming a middle-income country, with an estimated income of US $1,160, surpassing the target range of US $1,050 to $1,100 This growth indicates a robust development across nearly all sectors of the economy, reflecting a positive trend in the nation's economic progress.

The macro-economic balance remained stable, with inflation effectively controlled in the final years of the plan The state budget achieved an average annual mobilization rate of approximately 28%, resulting in a modest average budget deficit of only 5.7%, thereby ensuring national financial security By the end of 2010, government debt constituted about 44.5% of GDP, while outstanding foreign debt remained at a safe level A flexible monetary policy, grounded in market principles, played a crucial role in curbing inflation, fostering growth, and stabilizing the macro economy The commercial banking sector experienced significant development in both scale and credit quality, with most banks meeting the international capital adequacy standard of over 8% Additionally, the international balance of payments surplus was notably high during the early years of the plan.

The enhancement of socio-economic infrastructure has laid the groundwork for growth and economic reform while ensuring social security The establishment and effective operation of large hi-tech industrial plants, industrial parks, economic zones, export processing zones, and industrial clusters have significantly contributed to reducing hunger and poverty These developments have also improved the material and spiritual well-being of people across all regions of the country.

The achievement in the context of the world economic crisis was very remarkable But overall, the productivity, efficiency and competitiveness of the economy were

Pham Lan Huong – K17ATCB Page 16 highlights that economic growth remains unsustainable and below its potential, with slow progress in necessary changes The macroeconomic balance is constrained, and the advantages derived from this growth are minimal.

Economic growth during the period from 2006 to 2010 primarily relied on the exploitation of resources and inputs such as capital and labor, with minimal impact from aggregate factors like human science and technology This growth model showed little positive change, highlighted by inefficient capital usage, waste, and losses Additionally, the quality of human resources was limited and lacked motivation, hindering overall economic development and productivity.

The economic structure has shifted more slowly than anticipated, with the share of agriculture, forestry, and fishery in GDP decreasing by only 0.67 percentage points over the past five years, falling short of the targeted reduction of 5 to 6 percentage points Similarly, the industrial and construction sectors saw a modest increase of just 0.08 percentage points, compared to the expected growth of 2 to 3 percentage points In contrast, the service sector experienced a rise of approximately 0.59 percentage points Additionally, many enterprises, particularly small and medium-sized ones, continue to operate at low technological levels, and significant disparities exist in development across various economic regions Key economic sectors have failed to generate the necessary spillover effects to stimulate growth in other areas, indicating a lack of cohesive policy mechanisms to encourage balanced development across the economy.

Unqualified labor forces significantly hinder the quality, growth efficiency, and competitiveness of the economy From 2006 to 2009, Vietnam's World Economic Forum (WEF) Competitiveness Index dropped from 64 to 75, highlighting the impact of various factors such as inflation, inadequate infrastructure, and a shortage of skilled labor on the nation's competitiveness.

Pham Lan Huong – K17ATCB Page 17 highlights that corruption levels have seen minimal improvement Furthermore, the service sector that supports production and business is developing slowly, failing to meet the economy's demands This stagnation has led to increased intermediary costs and inputs, ultimately reducing competitiveness.

National finances faced significant constraints, with state budget revenues primarily allocated for debt repayments Development investments relied heavily on domestic and foreign loans, while bond issuance and capital mobilization facilitated improvements in infrastructure, irrigation, and education However, the impending maturity of government bonds posed risks to budget stability, compounded by an unstable international balance of payments and potential re-inflationary pressures.

The underdeveloped economic infrastructure and lack of synchronization have severely restricted domestic production and business activities, hindering economic cooperation with foreign countries Inadequate and outdated roads, ports unable to accommodate large vessels, and airports that cannot operate at night or in poor weather conditions contribute to these challenges Additionally, power sources and grids fall short of production and daily living requirements, with an average commercial output per capita of only 980KWh in 2010, lagging behind many nations Aging irrigation systems do not meet multi-purpose user needs, and investments in information and communication infrastructure in rural and remote areas have proven ineffective Urban infrastructure issues, particularly in traffic, water supply, drainage, and wastewater management, further exacerbate development congestion.

The fourth chart presents the GDP growth rate of Vietnam from 2011 to 2013, highlighting fluctuations in GDP from 2009 to 2015 During this specific period, the year 2012 recorded the lowest GDP growth rate among the three years analyzed, with sector contributions also being less significant compared to others Notably, the growth rate in the agriculture, forestry, and fisheries sector showed a declining trend.

In 2011, Vietnam's gross domestic product (GDP) experienced a 5.89% increase compared to the previous year, although this was a slight decline from the 6.78% growth observed in 2010 The country's emphasis on controlling inflation and stabilizing the macro economy contributed to a commendable and sustainable growth rate.

The gross domestic product (GDP) experienced consistent growth across all three regions, highlighting the significant contributions of the agricultural, forestry, and fishery sectors When compared to the same period last year, the GDP rose by 5.57%.

Figure 4: GDP growth rate of Viet Nam from 2005 to 2014

In the second quarter, the economy experienced a growth of 5.68%, followed by a 6.07% increase in the third quarter and a 6.10% rise in the fourth quarter The agriculture, forestry, and fisheries sectors grew by 4%, contributing 0.66 percentage points to the overall growth Meanwhile, the industry and construction sectors saw a rise of 5.53%, contributing 2.32 percentage points, while the service sector experienced a significant increase of 6.99%, contributing 2.91 percentage points These results underscore the effectiveness and timeliness of the government's measures and solutions.

In 2012, Vietnam's GDP, adjusted to 1994 constant prices, experienced a growth of 5.03% compared to 2011, with quarterly increases of 4.64%, 4.80%, 5.05%, and 5.44% Although this growth rate was lower than the 5.89% recorded in 2011, it indicated a consistent trend of improvement throughout the year.

Contributing to the overall 5.03% growth of the entire Vietnamese economy in

In 2012, the agriculture, forestry, and fishery sector experienced a growth of 2.72%, adding 0.44 percentage points to the overall economic growth The industry and construction sector saw an increase of 4.52%, contributing 1.89 percentage points, while the service sector improved significantly by 6.42%, contributing 2.7 percentage points to the total growth rate.

In 2013, Vietnam's GDP growth was estimated at 5.42%, slightly below the target of 5.5% but an improvement over the 5.25% growth rate in 2012 The quarterly growth rates were 4.76%, 5.00%, 5.54%, and 6.04%, reflecting a steady upward trend despite challenges such as high inflation and difficulties in domestic production The government's focused efforts to implement effective measures aimed at curbing inflation demonstrated the timeliness and efficiency of their strategies during a period of economic instability.

In 2013, the overall GDP growth rate reached 5.42%, with agriculture, forestry, and fishery sectors growing by 2.67%, contributing 0.48 percentage points The industrial and construction sector saw a growth of 5.43%, slightly down from 5.75% the previous year, contributing 2.09 percentage points Meanwhile, the service sector experienced a robust growth of 6.56%, surpassing 2012 figures and contributing 2.85 percentage points to the economy.

Regarding the structure of Vietnam's economy in 2013, the agriculture, forestry and fisheries sector took up for 18.4% The industry and construction sector accounted for 38.3% and the service sector 43.3% (2012: 19.7%, 38.6% and 41.7%, respectively)

Vietnam's diverse enterprise activities and state management have undergone significant renewal, driven by proactive policies and international economic integration The country has expanded its economic relations by joining ASEAN and the WTO, fulfilling commitments under ASEAN agreements, AFTA, and the Vietnam-US Bilateral Trade Agreement Currently, Vietnam maintains trade relations with over 200 countries and territories, having signed more than 90 bilateral trade agreements, which has fostered new developments in its foreign economic landscape.

The socialist-oriented market economy has seen significant advancements, with the Party's renewal policies being formalized into comprehensive laws and mechanisms This has led to a rapid development of the multi-sector economy.

In 2011, high inflation led to macroeconomic instability, prompting the government to take action in 2012 to stabilize the economy As a result, the inflation rate significantly decreased from 18.1% in 2011 to 6.8% in 2012 However, the monetary policies implemented to combat inflation also resulted in negative side effects, including bankruptcies, business dissolutions, and a freeze in the real estate market.

In 2012, Vietnam faced a significant challenge with bad debts in its banking system, particularly characterized by the high volume of non-performing loans among State-Owned Enterprises (SOEs), which accounted for approximately 70% of total bad debts, with economic groups and corporations contributing 53% Additionally, the real estate sector was closely linked to this issue, as it represented less than 16% of outstanding loans, yet its mortgages comprised 60% to 80% of the total collateral value.

In 2012, the frozen real estate market was seen as a significant obstacle to economic growth, contributing to a high inventory index This downturn in the real estate sector was largely due to prolonged periods of inflated property prices that exceeded their actual market values, coupled with a diverse structure of commodity groups within the market.

The warming of the real estate market has been essential for reducing inventory, stimulating production, and addressing bad debt issues However, achieving this goal is challenging, as many countries have faced real estate bubbles that took considerable time to recover from Successfully breaking the ice in the market necessitates patience, careful policies, and a long-term vision, as hasty administrative measures can lead to severe repercussions.

Figure 5: GDP growth rate in quarters of Viet Nam from 2014 to 2017

The fifth graph indicates GDP growth rate in quarters of Viet Nam from 2014 to

In 2017, the fourth quarter experienced a significant increase in GDP growth, peaking at 7.65%, which surpassed the 7.01% growth seen in 2015 Typically, the fourth quarter shows a more dramatic rise compared to other quarters each year, while the first quarter tends to lag behind in growth This trend highlights the importance of the fourth quarter in annual economic performance.

Between 2014 and 2016, the GDP growth rate showed minimal variation, with the most notable change occurring between the first and fourth quarters of 2014 Specifically, the GDP growth rate in the fourth quarter of 2014 was 1.9% higher than that of the first quarter.

Compared to 2013, GDP in 2014 was estimated to increase 5.98%, of which the first, second, third and fourth quarter rose 5.06%, 5.34%, 6.07% and 6.96%, respectively

In 2014, the overall GDP growth rate reached 5.98%, driven by significant contributions from various sectors Agriculture, forestry, and fishery experienced a growth of 3.49%, an increase from 2.64% in 2013, contributing 0.61 percentage points to the overall growth The industrial and construction sectors surged by 7.14%, surpassing the previous year's growth of 5.43% and contributing 2.75 percentage points Meanwhile, the services sector grew by 5.96%, adding 2.62 percentage points to the total GDP increase.

In 2014, Vietnam's economic structure demonstrated positive shifts, with agriculture, forestry, and fisheries contributing 18.12% to the total economy The industrial and construction sectors represented 38.50%, while the service sector accounted for 43.38% This marks a slight change from 2013, where these sectors comprised 18.38%, 38.31%, and 43.31%, respectively.

In 2015, Vietnam's GDP experienced a significant growth of 6.68% compared to 2014, surpassing the target of 6.2% and demonstrating a robust economic recovery The quarterly growth rates were 6.12% in Q1, 6.47% in Q2, 6.87% in Q3, and 7.01% in Q4 However, the agricultural, forestry, and fisheries sectors saw a growth of only 2.41%, which was lower than the 3.44% recorded in previous years.

2014, contributing 0.4 points on the general increase Industrial and construction sector increased 9.64%, much higher than the figure in the previous year Services sector increased by 6.33%

The size of Vietnam's economy in 2015 at current prices reached 4192.9 trillion; GDP per capita in 2015 was estimated at VND45.7 million, equivalent to USD

2109 per person, up USD 57 compared to 2014

In 2015, Vietnam's economic structure showed a gradual pace of growth, with agriculture, forestry, and fishery contributing 17.00% to the economy The industrial and construction sectors accounted for 33.25%, while the service sector comprised 39.73%, with a product tax minus subsidy rate of 10.02% This represented a slight change from 2014, when the respective contributions were 17.70% for agriculture, 33.21% for industry and construction, and 39.04% for services, with a tax rate of 10.05%.

In 2016, Vietnam achieved macroeconomic stability characterized by low inflation, substantial foreign exchange reserves, and a trade surplus of $2.84 billion over 11 months The country's GDP growth for the year was approximately 6.3-6.5%, which, while below initial projections, still surpassed the global average and positioned Vietnam among the top performers in the region, continuing a trend of year-on-year growth.

The economy's growth momentum has been strengthened by significant advancements in the manufacturing and service sectors, with retail sales of goods and services now accounting for 85.8% of GDP, up from 77.3% in 2015 Total capital supply has surged by 15.1% since 2015, reaching 170% of GDP, while the stock market has risen nearly 20%, with market capitalization climbing to 38% of GDP from 32.4% Additionally, foreign direct investment (FDI) has increased by over 20%, reflecting a surge in confidence among domestic and foreign investors due to ongoing improvements in the business environment.

In 2016, Vietnam implemented a central exchange rate regime alongside indicators for sustainable development and multi-dimensional poverty reduction targets The government adopted a mechanism that involved purchasing from commercial banks at zero dong and setting the USD deposit rate at 0 percent, which approached the public debt ceiling Consequently, this prompted an increase in the government debt ceiling from 50 percent to 55 percent of GDP.

Although severely affected by marine pollution, as well as by rainfall, typhoons, flooding, dryness, droughts and salinization, the decline in both capture and

In comparison to the previous year, agricultural production in Vietnam showed signs of recovery, with a significant increase in fruit and vegetable exports, which now surpass rice exports This growth was fueled by the adoption of high technology, contributing to a total agricultural export turnover of 7-8 billion USD Advances in scientific research and the introduction of new varieties and technological processes have reduced investment costs and boosted profits, enhancing economic efficiency By this time, over 90% of rice fields, 80% of maize areas, 60% of sugar cane fields, and 100% of new cashew plantations were in use Vietnam emerged as a leading exporter of shrimp, catfish, coffee, cashew nuts, pepper, and rice Additionally, cattle and poultry production experienced steady growth, with no reported cases of bird flu nationwide by year-end.

The credit system in Vietnam remains congested, with the Management Company of Vietnam Credit Institutions (VAMC) facing challenges due to a lack of transparency and resources, resulting in inefficient operations Public investment restructuring has not prioritized enhancing investment efficiency or cost reduction The progress of state-owned enterprises (SOEs) is sluggish, and the divestment of capital outside the industry continues to be a complex process Additionally, the agricultural restructuring linked to new rural construction is progressing slowly, yielding uneven results that fail to meet established targets.

Firms in the financial services sector are experiencing heightened competition and openness, which, combined with increased risks and technical costs, pose significant challenges They face growing demands for financial capacity, effective internal management, and the need to address issues like bad debts and low inventory of unsatisfactory products Additionally, strict rules of origin and the rigorous protection of intellectual property rights create further obstacles for enterprises reliant on foreign materials.

Pham Lan Huong – K17ATCB Page 26 to environmental protection and labor increased the cost of production of businesses

State-Owned Enterprises (SOEs) have been slow to innovate their organizational structures, equipment models, technologies, and governance capabilities As a result, the livestock sector, particularly in pigs and poultry, is experiencing increasing competitive pressure from imported products.

MEASURES OF THE GOVERNMENT

The inflation rate control

The initial focus of monetary policy was to address inflation, which is often linked to currency issues Between 2004 and 2007, the continuous increase in the money supply and outstanding loans significantly contributed to rising inflation rates In response, the Government implemented stricter controls on total payment instruments and outstanding loans, utilizing active and flexible monetary policy tools to align with market principles.

In addition to tightening monetary policy, the government has implemented measures to cut public investment and recurrent spending by agencies, while closely monitoring state-owned enterprises' (SOEs) investments to reduce the budget deficit SOE investments represent approximately 45% of total social investment, and reducing this funding aims to alleviate demand pressure and the trade deficit, ultimately enhancing economic efficiency The government has mandated a reduction in investment and administrative costs, instructing ministries and localities to identify and eliminate ineffective projects that do not require adjustment.

The Government requested ministers, chairmen of people's committees of provinces and cities as representatives of state ownership, closely scrutinizes the

Pham Lan Huong from K17ATCB emphasizes the importance of eliminating poor investments in state-owned enterprises (SOEs) to focus capital effectively This strategic approach aims to enhance productivity across all economic sectors, ultimately accelerating project timelines and facilitating quicker production outcomes.

Bad debts reduction

From 2011 to 2015, the government mandated the State Bank to collaborate with various ministries, sectors, and localities to effectively execute the "Restructuring the Credit Organization System" initiative.

2015 ", the project "Dealing with bad debts of credit institutions system" and the project "Establishment of Asset Management Company of Vietnam Credit institutions"

The Prime Minister addressed the issue of debt management for state-owned enterprises (SOEs) that have depleted their capital and are unable to repay bank loans He highlighted the government's initiative to restructure the credit institution system and manage bad debts from 2016 to 2020 To this end, the government has instructed the State Bank to evaluate the overall situation of bad debts within the credit institution system.

Following project approval, the government directed ministries, branches, and localities to focus on implementing solutions for addressing the bad debts of State-Owned Enterprises (SOEs) identified in the project, while also ensuring timely reporting of any difficulties and obstacles to the government.

Debt collection and foreclosure processes will be conducted by State-Owned Enterprises (SOEs) and credit institutions, including foreign banks operating in Vietnam, which must operate independently and be accountable under the law.

Business environment improvement

The government's initiatives focus on enhancing the use of information technology in public service delivery by state administrative agencies, integrating electronic payment methods within the finance sector Alongside electronic VAT refunds, the tax department has also tested electronic tax declarations for both individuals and businesses.

The Ministry of Finance has proposed a project to the Prime Minister for specialized inspections at customs offices, while also coordinating with relevant management ministries In a significant move towards efficiency, the General Department of Customs has partnered with 36 commercial banks to facilitate electronic tax collection, which now accounts for 90% of customs revenue and has dramatically reduced processing time from two days to just 15 minutes.

Vietnam has successfully reduced the time for cross-border clearance of goods by 6 hours and decreased transaction fees by $19, enhancing its business environment According to the World Bank, Vietnam's business environment improved significantly, rising to 68th out of 190 countries in 2017, a 14-position increase from the previous year This places Vietnam fourth in the ASEAN region, trailing only behind Singapore, Thailand, and Malaysia.

The Prime Minister has tasked the Ministry of Science and Technology with enhancing the support for enterprises in technology renewal and the application of scientific advancements through national programs Annually, reports are submitted to the Prime Minister to reinforce the implementation of the intellectual property development program for 2016-2020 Additionally, the Prime Minister approved Decision No 1062/QD-TTg on June 14, 2016, to facilitate and expedite the registration of intellectual properties.

Welfare policies

The National Employment Program, facilitated by the National Fund for Employment, enhances social security functions by providing credit incentives alongside training and job placement services, thereby fostering social progress and justice.

The government has implemented over 20 preferential credit policies aimed at supporting vulnerable groups, including the poor, ethnic minorities, unemployed laborers, and disadvantaged students These initiatives utilize a credit mechanism through various programs and organizations to assist individuals with land conversion and those with low incomes.

In particular, the project for People with Disabilities in the period 2012-2020 was approved by the Prime Minister and widely implemented

Social insurance in our country has undergone significant expansion, moving beyond its initial focus on workers, public servants, and armed forces Now, it encompasses all individuals within society, ensuring broader coverage and support for everyone.

Unemployment insurance, along with temporary allowances and compensation schemes, plays a crucial role in supporting the unemployed This initiative reflects a deep social commitment aligned with economic development and employment policies Furthermore, unemployment insurance not only provides financial support but also encourages individuals to actively seek new job opportunities, fostering a proactive approach to re-entering the workforce.

Despite economic challenges and limited resources, the Party and State prioritize investment in mountainous regions, ethnic minorities, and impoverished areas in Vietnam As a result, numerous social welfare policies have been implemented, leading to significant achievements in hunger eradication and poverty alleviation for these communities Vietnam's efforts have garnered international recognition, successfully meeting and surpassing the targets set by the Millennium Development Goals (MDGs).

Pham Lan Huong – K17ATCB Page 30 reports that the percentage of poor households is projected to decline by an average of 2% annually, decreasing from 14.2% at the end of 2010 to below 4.5% by 2015 In particular, poor districts are expected to see a reduction of 6% per year, dropping from 58.3% to 28% However, by the end of 2016, the rate of poverty in these districts rose to nearly 10%, partly due to the introduction of a new multi-dimensional poverty line based on updated income measures.

RECOMMENDATION

Enhancing the quality of the labor force

Human resources are essential for achieving rapid and sustainable development To enhance human resource management, it is crucial to improve management methods and increase the efficiency and effectiveness of the management apparatus Additionally, there is a need for policy and mechanism reforms, focusing on the development and management of human resources This includes improving the working environment, employment policies, income, insurance, social protection, housing conditions, and overall living standards, while also prioritizing policies that support high-quality talent and skilled professionals.

To enhance the quality of human resources in Vietnam, promoting education reform is essential and should be prioritized as a national policy The government must encourage companies to actively participate in vocational training and skill development Additionally, businesses should revise their investment strategies to focus on employee training High-quality human resources are crucial for the national economy, and addressing the challenges in training through practical measures is vital for fostering the skilled workforce needed for the country's development.

Focusing on remuneration is crucial for enhancing the quality of human resources within an organization An effective remuneration system fosters strong connections among employees, the organization, and its leadership Consequently, this stability in personnel enables the company to achieve its objectives, while employees experience joy, fulfillment, and passion in their work.

Pham Lan Huong – K17ATCB emphasizes that a robust personnel treatment policy enhances both the material and spiritual well-being of employees, fostering an inspiring and comfortable work environment This, in turn, allows employees to realize their full potential A well-structured compensation policy is vital for boosting the quality and efficiency of business operations, ensuring a stable and high-quality workforce By optimizing human resources, the effectiveness of other HR functions within the enterprise is also improved, ultimately supporting the business in maintaining a reliable and skilled workforce for society.

Innovating the management mechanism

The State's role is increasingly aligned with market mechanisms, fostering democracy in socio-economic life As international economic integration expands, strategic economic partnerships are being formed Efforts to build the ASEAN Community are underway, alongside the enhancement of the domestic market in accordance with WTO commitments Numerous new bilateral and multilateral free trade agreements have been negotiated, signed, and implemented.

The legal system and policies in place are insufficiently aligned with the demands of a socialist-oriented market economy, hindering business freedom and fair competition State-Owned Enterprises (SOEs) have yet to fulfill their essential roles, with many remaining small and lacking connectivity Additionally, foreign-invested enterprises predominantly engage in labor-intensive industries and resource exploitation, with limited technological advancement The overall market development is inadequate, prompting the government to enhance market factors and expedite both market restructuring and the legal framework.

Gross Domestic Product (GDP) represents the total value of goods and services produced within a country over a year, encompassing four key components: consumption (C), investment (I), government purchases (G), and net exports As a fundamental indicator of economic growth, size, and development, GDP is widely utilized to assess national economic trends Recognizing its significance, governments strive to enhance GDP and stimulate economic activity, making it essential to maintain stable GDP and growth rates Despite its critical role in evaluating economic efficiency, GDP has inherent limitations The author aims to explore this topic in depth, acknowledging their limited economic knowledge and anticipating constructive feedback from peers to refine their thesis.

Investopedia, GDP Definition Retrieved from https://www.investopedia.com/terms/g/gdp.asp

Investopedia How the Underground Economy Affects GDP Retrieved from https://www.investopedia.com/articles/markets-economy/062216/how- underground-economy-affects-gdp.asp

Associate Professor Ph.D Nguyen Sinh Cuc (2009) Tổng quan Kinh tế Việt Nam sau hai năm gia nhập WTO (2007 - 2008) Retrived from http://www.trungtamwto.vn

Tapchitaichinh Kinh tế Việt Nam giai đoạn 2006-2010: Thành tựu, hạn chế và bài học rút ra Retrived from http://tapchitaichinh.vn

Associate Professor Ph.D Bui Tat Thang (2014) Kinh tế Việt Nam giai đoạn

2011-2013 và triển vọng 2014-2015 Retrived from http://tapchitaichinh.vn

Vneconomy Bảy giải pháp chống lạm phát của Chính phủ Retrived from http://vneconomy.vn

Trithucvn Tăng trưởng và sự hạn chế của GDP Retrived from https://trithucvn.net

Associate Professor Ph.D Nguyen Ngoc Hung Tác động của nguồn nhân lực đến tăng trưởng kinh tế Việt Nam Retrived from http://tapchitaichinh.vn

Economicsdiscussion 6 Main Factors Affecting GDP Retrived from http://www.economicsdiscussion.net

Vov.vn 10 giải pháp xử lý nợ xấu và hạn chế nợ xấu Retrived from http://vov.vn

Tiêu đề	Vietnamese GDP in the Period of 2007 - 2016
Tác giả	Pham Lan Huong
Người hướng dẫn	Nguyen Phuong Lan (MA)
Trường học	Banking Academy of Vietnam
Chuyên ngành	Foreign Language
Thể loại	graduation thesis
Năm xuất bản	2018
Thành phố	Ha Noi

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