Three Growth Scenarios for Vietnam in 2013

The first scenario says that if the world economy continues to hold low growth, European debt is not settled, the Middle East political instability continues, Japanese and US economies are yet to improve, Vietnam’s exportation will be directly affected. Then, Vietnam’s GDP growth would stay at 5 per cent, exports will expand 12.8 per cent, trade deficit will rise 2.4 per cent, and the rate of investment to GDP will be 29 per cent.

 

The second scenario says the country’s GDP growth will be at 5.68 per cent if European debt is tackled, world political conflict is eased, US and Japanese economies recover, and global trade is better than in 2012. Then, FDI flows into Vietnam will get better, the rate of investment on GDP will reach 30.5 per cent, and export will expand 14.6 per cent.

 

The third scenario says Vietnam’s the economy will have a breakthrough. GDP growth will be as high as 6.34 per cent if the European debt is basically remedied, world trade and economic growth significantly improve, domestic production and business stagnation and bad debt are overcome, FDI flows are shifted from China and India to ASEAN, export growth reaches 16.3 per cent and trade deficit is 6.6 per cent.

 

Based on analyses and assessments, the NCEIF predicts the second scenario and makes the following policy recommendations:

 

First, the Government still needs to uphold its priority of macroeconomic stability, control inflation growth at the 2012 rate, and carry out tightened, flexible monetary policies. It needs to focus on solutions vis-à-vis improved capital-use efficiency in the economy, especially in the state sector. It also must accelerates the economic restructuring process, particularly public investment restructuring.

 

Second, it needs to have solutions to end the production stagnation enterprises are facing, by exempting or reducing taxes and fees, supporting and promoting domestic consumption, and focusing on middle- and low-income people in the society. It also essentially implements domestic capital attraction policies to prop up production and accelerate growth.

 

Third, it must have solutions to thaw out the real estate market in order to fix bad debt problems, especially in the banking system. Bank restructuring must be performed thoroughly and aggressively in order to boost the health of the credit market and unfreeze capital flows for businesses, rather than deal with bad debts of the banking system.

 

Fourth, it needs to implement comprehensive solutions (especially land, investments policies, etc.) in order to catch FDI flows shifted from China and India into ASEAN countries, direct these capital flows into prioritised investment areas, eliminate investment projects using obsolete and backward technologies, and minimise negative FDI impacts on the domestic business community.

 

Fifth, Vietnam needs to gradually and seriously perform corporate restructuring, especially for state-owned enterprises, to reduce misuse and loss of capital, and create a healthy and fair environment for enterprises of all economic sectors.

 

However, Lawyer Vu Xuan Tien, member of the Executive Board of Hanoi Bar Association, said the second scenario for Vietnam’s economic growth in 2013 lacks feasibility because the world’s economic volatility is out of the control of Vietnam. Moreover, Vietnam is an open economy which is highly vulnerable to any fluctuations of the world economy. As regards domestic economic policies, the researcher team’s recommendations show poor forecasting, because issues to be addressed are at macro levels and have been mentioned for a very long time but still remain at the “study” or “start-up” phase. Hence, it will hardly be realised in 2013. For example, solutions concerning property market unfreezing, bad debt tackling at commercial banks, corporate restructuring, and public investment restructuring are at the macro levels, which require a long time to be addressed, and cannot possibly be done in 2013.

 

Sharing this standpoint, a recent report entitled "Vietnam's economy in 2013 through the perspective of leading enterprises" released by Vietnam Report Joint Stock Company says up to 50 per cent of leaders of 1,000 largest taxpayers in 2012 admitted that business operations of their enterprises in 2012 are worse than in 2011. Also, as much as 55 per cent of businesses surveyed believe that the economy will not improve much in 2013.

 

Lawyer Vu Xuan Tien said Vietnam's economic growth in 2013 cannot be the same as the second scenario nor the third scenario. The first scenario with GDP growth forecast at 5 per cent is more likely to become reality.