Vietnam Economy to Revive Soon

Mr Ayumi Konishi, Asian Development Bank’s Country Director to Vietnam, has recently held a press conference on Vietnam’s stimulus package and economic prospects in the coming tie.

 

These stimulus packages are necessary but not enough. We also forecast that many people will be more adversely affected by the financial crisis but it is very important to ensure career opportunities for all people. The Government has recently launched several stimulus packages as others in the world have done. What the Vietnamese Government is doing is appropriate but more measures are needed to help economic crisis-affected people to escape poverty.

 

Regarding the interest rate policy, the Government pledges to maintain the current rate. And we do not expect devaluation and sharp depreciation of Vietnamese dong in the future because we know that this will not happen. But, with respect to foreign reserve management, the current reserve is rather wide for banks to respond to supply and demand changes of foreign currencies. Besides, the State Bank also needs to ensure the rational distance from the interbank reference rate because this may distort the economy. Therefore, I think that the State Bank needs to adjust its reference rate more frequently.

 

In 2009, ADB forecast that Vietnam’s GDP growth will moderate to 4.5 per cent. However, this forecast is affected by two reasons. First, it is uncertain to forecast the world economy performance. Second, there is uncertainty about what additional fiscal stimulus the Government might adopt. We have learnt that stimulus measures have had initial effect and we need more time to see deeper outcomes. Of course, they revitalised some aspects to a certain extent but depended much on global economic situations.

 

We do not have the unemployment rate but we forecast in our ADO 2009 report that the number of poor people is increasing this year. We have known that career opportunities in urban zones and industries have reduced and many people lost their jobs in the industrial sector. Part of stimulus policies has been applied to healthcare, education, job creation in rural areas and rural infrastructure construction. However, the Government should create more jobs in these areas to provide jobs for those returning from urban zones.

 

We are uncertain of effects of stimulus packages of the Vietnamese Government; thus, it is highly possible to see a 4.5 per cent growth for Vietnam this year. But, it is noted that worsening global economy may lead to deteriorating outcome. If FDI flows drop, the growth will be hit hard and current account deficit will be higher.

 

This year, economic slump will dent tax revenue. Falling export will also increase the Government’s debts. However, the deficit is expected to keep in check. From 2010, we expect that the deficit will reduce as income sources increase. Budget incomes will also rise in the light of growing economies and increasing commodity prices. In 2010, the Government will not have economic stimulus packages; thus, the budget deficit may be widened this year but not in 2010. 

 

We are considering many different measures to support the Vietnamese Government to weather its current difficulties. The support will help push up underway projects. Besides, we are also weighing on supports for small and medium enterprises. ADB is carrying out the last phase of a commercial financial expansion to support Vietnamese banks as we hope that we will assist commercial fields by financing the banking sector. We are looking for new ideas to enhance effectiveness of ADB’s supports for Vietnam.