“Vietnam will quickly ride out of crisis, even before China, which is expected to stay out of the crisis in a few months to go,” Deputy Prime Minister Nguyen Sinh Hung said on a monthly March cabinet meeting.
Bottom signals
In the first quarter of 2009, Vietnam’s GDP growth was 3.1 per cent, beyond a half of the growth in the corresponding period of last year. However, this is a rare highlight in a dark picture of slumping global economies, mostly negative. The above figure also reflected the health of the Vietnamese economy following a number of the Government’s solutions to rein in inflation and ward off economic slowdown. Many policymakers and economists forecast that the Vietnamese economy in the first quarter touched the bottom of growth circle and would quickly return to fast growth path.
In fact, the GDP growth depends on three basic elements: investment, export and domestic consumption. According to the statistics and announcements from the General Statistics Office (GSO) and the Ministry of Planning and Investment (MPI), the percentage of development investment capital on GDP might be lower than the rate of 43.1 per cent last year and the rate of 39.5 per cent expected for this year but it was hoped to be over 35 per cent. Foreign direct investment (FDI) capital in the first quarter was US$6 billion, in which fresh projects are valued at US$2.2 billion and existing projects registered to add US$3.8 billion. If the incremental capital output ratio (ICOR) is the same as last year at 6.92 times, the GDP growth was still above some 5 per cent.
With respect to export, in spite of numerous difficulties arising from the denting demand of major markets like the US, the EU and Japan, falling prices of crude oil, rubber, cashew nuts, coffee and tea, and unfavourable payment, exports still grew 2.4 per cent year on year to US$13.5 billion in the quarter. The Ministry of Industry and Trade (MoIT) ascertained that although global economies are facing difficulties in 2009, Vietnam was expected to earn US$58- 68 billion from exports.
With regard to domestic consumption, in the first quarter of 2009, total retail and service revenues rose 19.5 per cent year on year. The retail sales advanced 19.9 per cent while consumer price index (CPI) only increased a mere 1.32 per cent from December 2008.
Mr Le Duc Thuy, Chairman of the National Financial Supervision Committee and Former Governor of the State Bank of Vietnam, said: A number of positive signals in Vietnam will restore confidence. The higher March growth sent a signal of economic recovery. The real estate market is warmer when the current price is 20 per cent higher than the bottom seen in 2008. The stock market is also reviving after easily breaking through the 300-point benchmark. Mr Thuy affirmed that the GDP growth of 3.1 per cent is the bottom mark and will increase in the following time.
Fast Second quarter growth
At the monthly March cabinet meeting, many proposals were put on the table for discussion, including the widening of investment capital flows, more corporate support methods, domestic trade expansion and priorities for rural markets. The points concerned economists, businesses and consumers. Finance Minister Vu Van Ninh proposed the Government to apply business support measures such as VAT reduction for fibre, clothing, apparel, construction material, automobile and motorbike sectors, corporate income tax reduction for small and medium enterprises, and tax exemption for low-income earners. Minister Ninh said the Government will reduce taxes in nine months for companies with less than VND10 billion in registered capital and a workforce of less than 300 people and cut 30 per cent of rentals for garment, textile and mechanical enterprises, or delay the time of tax payment for importers. Industry and Trade Minister Vu Huy Hoang proposed the Government will quickly ratify VND51 billion for the domestic trade promotion programme. He said the domestic market consumption needed to be expanded, especially for such commodities as steel, fertilizer, petroleum and cement.
Together with that, priorities for rural markets are considered an important measure to boost domestic demand. Prime Minister Nguyen Tan Dung emphasised that agricultural and rural growth will push industry and export.
Deputy Prime Minister Nguyen Sinh Hung expressed his optimism about the economic recovery. He said positive signals in the first quarter will create development trends for the following quarters. “Our current concern is not only to maintain growth but also restore growth rate when see the bottom of the crisis,” he said.
Box:
Vo Van Quyen, Deputy Director General of Domestic Market Policy Department under the Ministry of Industry and Trade (MoIT), said: The wide gap between export and domestic market has been narrowed in the past 10 years. Last year, export revenue approximated at US$62 billion while domestic retail sales totalled VND980 trillion (nearly US60 billion), a rise of 31 per cent over 2007. Thus, the sizes of these two markets are not very different. In the long term, when the economic growth is higher, incomes will increase and the domestic market is expanded as a result. If export continues shrinking, the domestic sales will exceed the export. Importantly, we need property demand stimulus measures.
Luong Tuan
Vietnamese
