Economic Accomplishment 2009: Success in Riding out Crisis

 

In its report on the East Asian-Pacific region’s economic situation, the World Bank (WB) assessed that Vietnam had cope well with impacts from the global financial crisis. Vietnamese Minister of Planning and Investment Vo Hong Phuc also said that the biggest success in the country’s economic management in 2009 is the fast and clear-headed response to the economic downturn.

In the context of the wide spread of the crisis in the whole world, the Vietnamese government strived to limit and overcome negative impacts particularly in rural areas, which account for nearly 70 % of the country’s population. The government has promoted a series of policies and measures including stimulus packages to curb the recession stimulate the growth in spite of the sharp hike of foodstuff and fuel prices during the first half of 2008.

 

According to the World Bank’s report, positive signs of the recovery of the Vietnamese economy have resulted from the government’s moves and efforts. While the production is still facing difficulties due to the demand reduction, construction is emerging as a leading factor of the recovery. The construction sector has presented a strong growth, partially attributed to the government’s stimulus packages. In the third quarter, the construction sector’s growth pace reached 9.73 %. The sector continued to take lead of the growth in the remaining months of the year and is forecast to keep the high growth pace in 2010.

 

The domestic consumption is an important element to the Vietnamese economic recovery as the retail sales revenue in the first eight months of this year increased 9.3 %. Because the export sector met difficulties due to the crisis, many enterprises returned back the domestic market and gained remarkable profits. The campaigns to call on Vietnamese consumers to use Vietnamese goods have received huge attention of the society.

 

Dr Le Xuan Nghia, Vice President of the National Financial Supervisory Commission said that enterprises had overcome the most difficult period, the production had gradually recovered and grown. The figures such as the GDP growth of 5.2 %, CPI of 7 %, budget overspending of 6.9 %, 76,000 new enterprises set up and more than 1.5 million jobs created are very significant.

 

Another positive sign are from foreign investors. Truong Dinh Tuyen, member of the National Financial Supervisory Commission said that FDI currently accounts for 37 % of the country’s total industrial value and nearly 19 % of the whole economy. This shows the huge importance of FDI source to the Vietnamese economy. 

 

The global economic recession has damaged obviously Vietnam’s export sector. The export revenue of Vietnam’s almost all industries and traditional markets fell sharply. Although Vietnam’s export reduction was less than those of other developing nations, 2009 becomes the first year the Vietnamese economy has suffered the export fall since it started the economic reform process. However, the apparel sector has still presented an impressed growth. Exports of seafood and woodwork also showed positive signs, particularly in the remaining months of this year since the world economy starts to recover again.    

 

Although the Vietnamese economy has basically overcome the most difficult phase, challenges in maintaining and stabilizing the economy’s macro policy especially the monetary demand-supply balance, interest and exchange rate stability are existing. These will be barriers to the Vietnamese economy in the coming years.

Dr Le Xuan Nghia said Vietnam has coped with the recession this time quite well. The country has taken three years to reach the growth pace while it took five years in the financial recession in 1997. This is attributed to the country’s potential which is quite good at present, reflecting in the firm financial and banking system. Although being new, the Vietnamese stock market has represented its certain stability and effectiveness. In fact, during the past time many enterprises have increased their registered capital quickly.      

 

In terms of the existing issues, Minister Vo Hong Phuc said the implementation of the government’s stimulus packages is quiet good, but there are still some procedures in some localities interrupting the implementation. Regarding infrastructure construction and investment, the disbursement pace of both government bonds and ODA, FDI sources is not high. Other administrative procedures such as customs and taxes are still heavy, interrupting the operation of enterprises. These issues need to be considered to seek methods in 2010.

 

Truong Dinh Tuyen mentioned another difficulty. In the past time, he said, Vietnam’s ranking of macro economy stability trends to fall down, mainly relating to the foreign exchange rate and foreign exchange market due to the tension of foreign currency. If the State Bank of Vietnam and the government manages better the foreign exchange rate, the situation will be eased in the coming time and create the good payment for the foreign exchange market.

 

There still exist some shortcomings in the Vietnamese economy. The industrial production represented the lowest growth over the past ten years. The export revenue reduced 11.6 % while the trade gap is high. The economic growth’s quality needs to be paid more attention. The National Assembly’s Economic Commission said that because the macro balance is not yet sustainable and the investment effectiveness is not yet improved, the country should focus on the growth quality instead of the growth pace.