Strengthening Governance of Monetary Policies

To implement the socio- economic development plans for 2014 and 2015, which have been recently approved by the National Assembly in the 6th session of the National Assembly XIII, the State Bank of Vietnam has held a conference to collect comments, analysis and evaluation of the economic experts from ministries, research institutes, and universities on the economic status and the effectiveness of the policies in recent years, accordingly forecasting the trends, to make recommendations and propose solutions on the macroeconomic policies in general and monetary policy in particular for 2014 and 2015.

 

In the very last months of the 2013, although the production and business activities still remain tough, the macroeconomics and the currency markets have exposed many positive changes. The economic growth is higher in each quarter; it is more likely to achieve the growth rate of 2013 from 5.2 percent to 5.4 percent. The inflation rate continues to be curbed at 6.5 percent, lower than the 6.81 percent of inflation rate in 2012; the interest rates is sharply declining; the exchange rates remain stable; the dollarisation of the economic is declining; and the country's foreign exchange reserves are enhanced. However, according to the experts, the issue of credit flow circulation and the process of handling the bad debts should be undertaken by many other policies, along with the monetary policy.

 

According to the forecast of the macro-economic situation, many experts believe that the economy in 2014 and 2015 will be improved, compared to 2013, because the economic growth has signs of recovery and the export activities and foreign direct investment will be enhanced after Vietnam signs the Trans-Pacific Partnership agreement (TPP). However, others agree that inflation should not be ignored because risks may rise during the process of implementing the measures to support economic growth and increasing the budget deficit ceiling to 5.3 percent. The production and business activities are still facing challenges and the capital absorption of the economy remains weak; therefore, to achieve the economic growth targets of 5.8 percent as required by the National Assembly, the government should come up with different solutions from many other ministries and authorities to promote the credit flows in the economy.

 

Mr Sumit Dutta, CEO of the HSBC Vietnam, said that Vietnam has a sound economic foundation due to the young population, high literacy rates, rapidly declining poverty rate, high urbanisation rate and the least currency devaluation of the VND in the region. This makes the foreign investors have a positive assessment of Vietnam's economy. Therefore, Sumit Dutta recommended that the establishment of the company to handle the bad debts be a good solution in the current context, but the State Bank of Vietnam should note that the restructuring of the banking capital requires a higher awareness of risk management issues.

 

According to Cao Sy Kiem, President of the Small and Medium Enterprises Association, the State Bank of Vietnam has been back on track with the goals of a central bank of stabilizing the purchasing power of the currency and controlling the inflation. This is a good signal for the economy. According to Mr Kiem, the State Bank of Vietnam has implemented monetary policies based on the market principles to ensure transparency and create consensus of the business community and investors. However, according to the experiences of Kiem, who had been a former Governor of the State Bank of Vietnam, the tasks of the State Bank of Vietnam will be more difficult; for example, it is required for a series of comprehensive solutions on the dollar and gold-related issues as well as the handling of the bad debts as a central objective of the entire banking sector.

 

Sharing the same views with Mr Cao Sy Kiem, Le Xuan Nghia, Director General of the Business Development Institute, said that the State Bank of Vietnam should pay particular attention to handle bad debts and strengthen governance in accordance with the international practices, as well as facilitate the supervision and transparency of the information to enhance the confidence of the market in the operating processes of the monetary policy and banking activities.