Internal Weaknesses of Vietnam's Economy Revealed

Economic Report for the first nine months of 2013 issued by the Ministry of Planning and Investment shows that many important economic indicators have improved significantly. Estimatedly, the GDP has increased 5.14 percent compared with the same period in 2012, improving steadily over each quarter (first quarter: 4.89 percent, second quarter: 5 percent). In which, GDP of key areas such as agriculture, forestry and fisheries rose 2.39 percent, construction and industry 5.02 percent and services about 6.25 percent. The index of industrial production (IIP) also has shown gradual growth over the early months of 2013: 4.9 percent in the first 3 months, 5 percent in the 6 months, and 5.4 percent in the 9 months.

 

As for foreign direct investment (FDI), as of September 20th 2013, there were 872 projects granted investment certificates with a total registered capital of US$9.3 billion. ODA and preferential loans during the first nine months has reached US$4.59 billion, an increase of 8.83 percent compared to the same period last year, of which the disbursed amount was US$3.13 billion.

 

If looking at the statistics only, it can be said that Vietnam's economy has been showing significant positive signs. However, truthfully, Vietnam's economy is still having a difficult time fully overcoming crisis compared with other countries in the region. The growth rate of Vietnam in 2011 - 2012 is equivalent to the Philippines, lower than Malaysia and Indonesia but higher than Singapore and Thailand. However, all those countries above, except for Singapore, in the reporting period, have achieved a higher growth rate than in 2008-2010, while Vietnam's growth has suffered decline in both two periods.

 

Analysing this problem, Former Deputy Prime Minister Vu Khoan believed that evaluating the economic recovery should based on a more general view of 10-year period from 2011 to 2020 instead of focusing in a single year. It’s also necessary to take into consideration all areas of industry, not only the economic indicators. In fact, when monitoring changes in economic conditions, figures such as bad debt always changing which make it a big burden to the economy. Mr Khoan also pointed out that it’s vital to identify the weaknesses and limitations in the government’s guidance. Because when the national economy confronts difficulties, the government sometimes overlooked the internal cause, merely pointing to the impact of global crisis as the main reason.

 

Deputy Director of the Central Institute for Economic Management, Mr Vo Tri Thanh offered another opinion of Vietnam’s economy has been affected going through a political sensitive period of preparing for the end of term. He also noted that during the last 3 years, the government has focused mainly on economic stability, recovery and reconstruction. Vietnam must be persistent, consistent, not under any circumstances evade or distort these objectives. Also, Vietnam should not rush the recovery, instead focusing on macroeconomic stability.

 

Another pessimistic assessment from Head of the PCC’s Economic Commission, Mr Vuong Dinh Hue warned that many objectives of socioeconomic development set out at the 11th Party Congress could not be completed in time, leading to the prospect of Vietnam lagging far more behind than other regional economy. Additionally, many core weaknesses of the economy which exist for a long time, now fuelled by the global financial crisis and economic downturn has been clearly exposed.

 

Based on these facts, Vietnam’s GDP in 2013 was set to 5.4 percent increase. GDP estimated for 2011-2015 was 5.8 percent, fails to meet the initial target of 7 - 7.5 percent increase (after being raised from 6.5 - 7 percent). Meanwhile, inflation rate for the period was thought would grow 9.2 percent while the objective was of 5 - 7 percent increase. In short, while the macro economy full of recovery indicators continue to send out weak signals, Vietnam is stuck in a dilemma, having been forced to choose either enhancing growth or controlling inflation.