Economic Challenges in 2013

He said the Vietnamese economy underwent a lot of abnormal changes in 2012 featured by volatile developments of key economic sectors such as banking, real estate and securities investment. It witnessed a very hot development of securities investment, real estate and banking channels in early months of the year, but sluggish movement, even a slump, of these channels towards the end of the year. However, on the whole, the economy still upheld stable momentum for growth in the coming years.

 

Vietnam like other countries in the world takes GDP indicator to assess the health and development of the economy. Vietnam revised GDP growth many times in 2012. In particular, we set the target of 5.3 - 5.7 per cent in the last six months, revised to 5.2 per cent in the last 10 months and accepted the 5.03 per cent growth at the end of the year. Indeed, these revisions were lower than the target proposed by the lawmaking National Assembly. But, this also proved right economic administration of the Government. It based on realities to make adjustments, not chase after the initial target at a dear cost. This growth was lower than the plan but was also acceptable. In reality, this growth was partly impacted by drastic solutions of the government to inflation taming and macroeconomic stabilisation like tightened monetary policy, public spending reduction and declined consumer demand.

 

GDP growth was importantly contributed by crude oil export. Specifically, crude oil output rose 9.8 per cent in 2012.

 

This commodity accounts for 30 per cent of Vietnam’s GDP. Arguably, crude oil maintains the GDP growth momentum of Vietnam.

 

Statistical data showed that Vietnam’s exports were estimated at US$10.4 billion in December, up 0.5 per cent from November and 15 per cent from 2011. In 2012, the country earned US$114.6 billion from exports, up 18.3 per cent year on year. Vietnam enjoyed a trade surplus of US$ 284 million in the year - the first year with a trade surplus since 1993. Notably, the foreign-invested sector achieved a trade surplus of US$12 billion while the domestic sector on the contrary incurred a trade deficit of US$11.7 billion. Major forex-earners of the foreign-invested sector included electronic devices, computers, components; telephones and parts, apparels and footwear. As these were outsourced items, their net export incomes were modest.

 

In the context of global and domestic economic downturn, slowing growths in some industries were unavoidable. High inventory level, slowly settled bad debts and volatile GDP growth were typical examples. These remain challenges to the economy in 2013.

 

Inventory index of manufacturing and processing industries as of December 1 marked up 20.1 per cent from a year earlier. Some sectors saw very high inventory growth like motorised vehicle production with inventory growth of 76.6 per cent, fertiliser and nitrogen compound inventory growth of 42.1 per cent, and processed and preserved seafood inventory growth of 28.6 per cent.

 

Increased inventory in 2012 was already predicted. The above data suggest that manufacturing activities have not been improved and might worsen in 2013. The rise in stocks is partly resulted from repeated price hikes in 2012 and weakened consumer demand.

 

CPI growth was quite volatile in 2012. It did not advance during the Lunar New Year or ease after this largest public holiday and its growth was not caused by foods and foodstuffs as in other years. The abnormal change was seen in September when CPI leaped 2.2 per cent from August. This change started to distort specialist forecasts featured by fears of deflation at first and fears of inflation later. But, CPI slowed down in the last three months of the year.

 

But in my opinion, we are living in a market economy and prices are decided by market factors. State management agencies still make big increases while making little by little decreases of gasoline prices. In explanation to their moves, authorities usually say that our prices remain low in comparison with other countries. This is somewhat unreasonable because each country has a different economic structure and we cannot force Vietnamese people to pay as much as people in other countries.