Two Economic Scenarios for 2012

In the first scenario, weak growth and the world’s economy facing increased public debt will influence Vietnam. In comparison with 2011, Gross Domestic Product will increase by 6 percent, export turnover will increase by 12 percent to US$106.4 billion (trade deficit increase to US$12.8 billion, accounting for 12 percent of the whole export turnover), over-expenditure will not exceed 4.8 percent of GDP and consumer price index (CPI) increase will be under 10 percent. In the second scenario, strong growth is forecast to be more positive with GDP of 6.5 percent, total export turnover of US$ 107.4 billion and social investment accounting for 43 percent of GDP. Closely observing the world’s economy, Mr Bui Quang Vinh, Minister of Planning and Investment said that the Government should adopt the first scenario if the world economic status becomes more positive in the coming time. On the contrary, the second one will be the last choice for Vietnam economy to beat set targets. The Ministry also stressed financial and currency policies and price, which are supposed to be the most challenging and sensitive at the moment. According to the Ministry, administrative measures will be replaced by stronger ones to keep control of the total payment and credit, reduce interest rate floor and give priority to agricultural and rural loans, small and medium enterprises, export businesses and those in supporting industries.

Neither the above scenarios seem highly persuasive, according to economic experts. Economists Le Dang Doanh and Pham Chi Lan shared the common opinions that the two scenarios are a bit exaggerated. According to Ms Pham Chi Lan, the target of CPI increase lower than 10 percent was totally impractical. She said that in the current context of the global recession impacting Vietnam’s economy, Vietnam should choose a low but practical economic scenario and there should be modest growth forecast. Accordingly, it isn’t really necessary to target GDP of 6-6.5 percent while inflation hasn’t been curbed. The more reasonable rate may be 5- 5.5 percent. The Vietnam Government should consider inflation curbing ability and have many measures to boost production for these enterprises, but not race for high growth rate.

 

According to Dr Le Dang Doanh, it’s time to look straight at Vietnam’s economy, to be braver and more decisive to comprehensively and thoroughly reform the economy. He pointed out that the economic indicators are bad, such as: high inflation; State over-expenditure; high trade deficit and international imbalance of payment; foreign and public debt; Vietnamese currency exchange rate; and decreasing confidence of residents, domestic and foreign investors. Besides, according to many international organisations’ evaluation, the bank system’s health has revealed many problems with a growing percentage of bad debt. Confidence in Vietnam is being lowered by foreign enterprises. In addition, other indicators like Vietnam’s competitiveness ranking decreased by 6 levels, to 65^th over 142 economies. Especially, some indicators are highly risky for the economy; to retain high investment we must increase foreign loan not only through ODA, but also selling bonds in international financial markets. In the coming time, if Vietnam is unable to pay back, there will be a national great burden. He also said that the key and core solutions to Vietnam’s economy at the moment are to reduce collection and expenditure and restructure state enterprises.