Vietnam Needs to Continue Drastic Measures to Stabilize Macro- economy

 

In the first six months of 2011, the global economy saw slowing growth. Many risks emerged for world economic development, including high inflation, changes on the financial market, worse public debts in European countries, and rising political instability. In the current context of the world economy, Vietnam’s emerging economy has suffered lots of negative effects, though the country’s economy has recovered strongly. The country’s economic growth has been slow over the past time with emerging risks. According to statistics, the country’s GDP in the first half of this year rose 5.6 per cent, lower than 6.16 per cent of the same period of 2010. The country’s consumer price index in the first six months of this year rose 13.29 per cent in comparison with 4.7 per cent in the first half of 2010. The country’s trade deficit remained high at US$6.7 billion, equal to 19 per cent of the country’s total export turnover, and is likely to increase further in the coming months. FDI Disbursement decreases 1.9 per cent against the same period last year. In this situation, the announcement of Resolution 11/NQ-CP on February 24, 2011 is the Vietnamese Government’s decisive solution, aiming to stabilize the economy, strengthen the legal framework, and create healthy administrative procedures so the country would not be affected by world economic instability.

 

Recognizing the risks the country is facing, in the first months of 2011 the Government of Vietnam assigned relevant agencies responsible for regulating monetary policies to work out measures to tighten control over the monetary and financial markets to keep credit growth below 20 per cent, keep total payment increase at around 15 -16 per cent, and hold lending interest rates and exchange rates at reasonable levels to facilitate national economic development. In addition, the government has also asked agencies to prioritise capital for local production and business, agriculture and rural development, export activities, supporting industry, and small and medium-sized enterprises. The government also asked for a reduced rate of credit for non-production sectors. Though the Government’s targets for the financial sector were very specific, macroeconomic development remained unstable in the first six months of this year. Unless shortcomings are dealt with comprehensively, the macro economy will suffer negative impacts.

 

In my opinion, agencies and ministries in the field have tried their best to fulfil their tasks, especially the State Bank of Vietnam. In the difficult time, the State Bank of Vietnam has taken initiatives in mapping out professional measures to realise the government’s set targets. The State Bank of Vietnam has taken difficult measures, including implementing flexible monetary policies to ensure payment capacity, ensuring liquidity for credit organizations and stabilising the financial market in the long term. In particular, the State Bank of Vietnam had raised the compulsory reserve ratio on foreign currency deposits at commercial banks by 3 percent, flexibly implementing open market operations, gradually raising interest rates to the 10 to 15 per cent per annum range. In addition, the State Bank of Vietnam also had credit policies for agriculture production and rural development, issued Decree 01/CT-NHNN dated March 1, 2011, asking credit organisations to adjust their production targets in line with the credit growth of below 20 per cent. Thanks to the measures, the national financial system became more stable and effective. Accordingly, by June 20, 2011, the national total payment rose 2.54 percent, the credit structure has been more suitable for the Government’s targets and satisfies lending demands of enterprises. These figures demonstrate the continuous efforts of the national financial sector, greatly contributing to the stabilisation of the national economy over the past years.

 

Throughout national history, Vietnam’s economy has experienced many difficulties. However, thanks to the potential of the agriculture sector, the national economy has recovered and developed strongly. To date, Vietnam has been highlighted by international friends as one of the countries leading agriculture development all over the world with such specific products as rice, coffee, pepper, tra fish, and basa catfish. Vietnam boasts great potential for agriculture development, including geographic location, labour force, and intensive farming cultivation. However, Vietnam needs to focus more on sustainable development targets. The sector is facing difficulties and challenges: Vietnam should develop the agriculture sector with a focus on investment to improve the quality of finished products, and should not pursue quantity, resulting in low economic value. Coffee and rice are typical examples of this. Currently, Vietnam exports 80 percent raw coffee. Similarly, the country is now the second largest rice exporter in the world. But its quality and price are matters of special concern.

 

In line with Government Resolution 11/NQ-CP, the financial sector will continue applying measures to tighten monetary policies, keeping credit growth below 20 per cent. In the upcoming time, measures will be worked out to reduce outstanding loans for the non-production sector to 22 percent by the end of June and to 16 percent by December 31, 2011. Regarding important social and economic indexes, including CPI, the indexes have decreased somewhat on-month, but still rose on-year. Thus, for the remaining months of this year, relevant agencies and ministries need close supervision and effective implementation.