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National economy better, but difficulties ahead: experts

Wednesday, 24 June 2009

While affirming that the national economy has become better thanks to the Government’s efforts, experts have also pointed out that difficulties still exist.

Nguyen Hai Nam, Director of Li Ta Fashion Company, said that recent price changes have worried businesses much. As the petrol price has increased three times within one month and electricity and water prices have also increased, production costs have increased by 10 percent.

The noteworthy thing is that petrol and electricity prices increased at the same time as the Government launched the demand stimulus packages. This has been described by businesses as a push backward after a push from behind.

Regarding exports, Bui Nguyen Khanh, General Director of Ca Mau Seafood Company, said that the turnover of his company dropped dramatically by 40 percent in the first six months of the year.

“The Government’s demand stimulus policies have shown effects, but obstacles still exist. The national economy has shown signs of becoming better, but it is not clear how everything will go,” he added.

“Don’t be too optimistic” is the advice of experts to businesses.

Dr Le Dang Doanh said that he can see signs of the economy’s recovery. The real estate and stock markets have warmed up, while the production results of some industries have improved.

However, Doanh has warned that one should not be too optimistic while the global economy still has not recovered yet and exports make up 72 percent of Vietnam’s GDP.

“Overly high optimism will lead to the massive investment and injection of money in circulation. It would be a big problem if businesses made many products and then they could not sell the products,” Doanh said.

Pham Chi Lan, a senior economist, said that the International Monetary Fund (IMF) has listed Vietnam among 26 countries that bear the biggest impacts of the global economic crisis.

Lan said that unemployment will not improve until exports and industries can escape difficulties. The unemployment rate is an important factor that reflects the seriousness of crisis.

President of the World Bank (WB) Robert B. Zoellick recently affirmed that the global economic crisis will continue in 2009, and poor countries will still be the biggest sufferers.

Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management (CIEM):

Regarding the interest rate subsidy programme, I think that the goal of the programme is to help businesses and banks survive difficulties. The state needs to rescue those businesses who fall ‘sick’.

However, there are some problems with the policy.

First, the risk is that we cannot create actual competitive capability. WB and IMF have also warned about bad debts. Second, the state cannot control the flow of capital: borrowers of the programme may use the capital for some other purposes.

There are a lot of arguments about Vietnam’s demand stimulus packages, about the scale of the packages, opportunities for corruption and possible impacts on macroeconomics. WB and IMF have even suggested not implementing the second demand stimulus package.

A high risk existing is the possible return of high inflation. The initial target for inflation was six percent, while it has been raised to ‘below 10 percent’. It is highly possible that inflation will be 8-9 percent this year.

Regarding the monetary policy, IMF has suggested that Vietnam should remove the ceiling interest rate scheme as soon as possible. However, I’m afraid that this will cause big shocks.

Source: http://english.vietnamnet.vn

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