At this moment, the Government still persists in its anti-inflation target for macro-economic stabilisation and social security. The goal is increasingly difficult to implement in the context of instabilities that may contain hidden risks to the economy, such as: the gold price escalation has increased the pressure on the VND/USD rate, which is affecting the balance of imports and exports.
Targets achievable
The summarised data from the implementation of Resolution 11/NQ-CP dated February24, 2011 has optimistically shown the success of Government’s solutions. In the long-term, with specific measures, the implementation of Resolution 11 has considerably increased the GDP to 5.4 percent and 5.7 percent in the first and second quarter, respectively. The overall economic picture indicates strong export growth, exchange rate stability, increasing foreign reserve and positive results in social welfare.
In the third quarter, generally economic conditions have gradually become more stable. The inflation rate, the index most concerning people, reached 1.17 percent because there is an increase in farming products’ price due to the influx of foreign merchants in domestic markets. Nevertheless, this index is considered to be significantly lower than in earlier months.
In August, despite the volatility in gold price, the overall picture of the economy was relatively bright, total export turnover is estimated over VND60.8 billion, up 33.7 percent; imports accounted for over US$67 billion, increased approximately about 25.4 percent, of which deficit reached US$6.2 billion. Besides that, inflation tended to decrease. Some advantaged sectors in agriculture had good harvests and price, which created a solid foundation for economic development. The tourism industry has strongly developed in retail sales and the number of international tourists to Vietnam has increased.
Especially, key economic sectors still reached and exceeded their targets. For example, in the PetroVietnam Oil and Gas Group, the current revenues from crude oil sales of Vietsopetro reached US$ 54.3 billion, contributing to state budget and the Vietnamese side’s profitability nearly US$34.4 billion. The Vietnamese - Russian joint venture Vietsopetro has turned Vietnam into one of the three largest countries in crude oil exploitation in Southeast Asia. In the field of investment, out of 35 countries and territories investing in Vietnam since July, Hong Kong (China) has become the largest investor, investing about US$2,794.3 million, accounting for 36.6 percent of total newly-registered investment capital. Hong Kong has outdistanced other traditional partners of Vietnam such as: Singapore, US$1,320.9 million, holding 17.3 percent; Japan, US$540.8 million, holding 7.1 percent; the People’s Republic of China, US$445.3 million, holding 5.8 percent; South Korea, US$404.5 million, holding 5.3 percent; and Malaysia, US$346.7 million, accounting for 4.5 percent. These figures show that Vietnam's economy is still an attractive destination for foreign investors.
Anxiety
However, in a recent partners’ consultation meeting on macro-economic development held by the Ministry of Planning and Investment, many economic experts frankly pointed out the inadequacies in the Vietnam economy in the medium and long term. Specifically, according to Ms Victoria Kwakwa, World Bank Country Director in Vietnam (WB), in the future, Vietnam will still face major economic problems putting pressure on inflation such as: new pressures on the exchange rate, high interest rates (20-30 percent), concerns about bank health, fluctuating CPI (2 digit level), and unstable prices of many commodities. Besides the problem of ensuring the sustainability of public debt and avoiding bad debt, keeping the currency stable is one of the biggest concerns of the international community in maintaining macroeconomic stability.
Just like international economists, economists in the country also expressed concerns about the instability of Vietnam’s economy. Specifically, although inflation has decreased, overall it remains high. The reduction of public investment has been implemented but the results have not been as expected. Many key projects related to economic sectors such as transportation and construction are still conducted uneconomically. Gold price rose to record highs, pushing interest rates up too high, making it difficult for small and medium enterprises. According to experts, if enterprises want to operate effectively and profitably, their growth rate must exceed 30 percent. This is actually very difficult to develop in the context of the current economic downturn.
Besides, the agricultural sector which has long been the backing of the macro-economy at each time of turmoil also revealed weaknesses in management and development planning. Taking a business course of litchi, an agricultural brand of Vietnam as an example, there were times when Chinese traders gathered a large quantity of litchi at the price of about VND 3,000/kg, and immediately sold in the Chinese market at the price converted to VND 300,000/kg.
Regarding the international community concerns on regulating the macro-economy, Prime Minister Nguyen Tan Dung frankly acknowledged its shortcomings. However, the Prime Minister also pointed out besides the efforts of the government administration and the departments, Vietnam also wants to receive more support and cooperation from experts, donors and international community. The Prime Minister aims to maintain some basic economic indicators, for example inflation will be reduced and stay at 18 percent, in 2012 inflation will turn back to a one digit number, credit growth is targeted to be lower than 20 percent, total payment measures will increase less than 15 percent, and particularly, public debt will be tightly controlled and kept at a safe level.
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