The economy will have major changes as aggregate demand increases and the business community step into a new cycle of growth, said economic experts at the workshop on “Economic prospects and policy visions 2014" held in Hanoi by the National University Economics and the Vietnam National University of Hanoi.
This annual event aimed to create a forum for economists, researchers and policymakers to discuss and share viewpoints on economic policies in 2013 and economic outlook in 2014. And, this is also a stepping stone for the release of Annual Report on Vietnam's Economy 2014.
Optimistic signs
Anticipating resilience of Vietnam's economy in 2014, Dr Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management (CIEM), said that Vietnam is among a few countries with significant competitive advantages, citing agriculture and information technology. Wages in China and India, two IT powerhouses, tend to rise while Vietnam is known for low-paid salary. This is the first competitive advantages to attract foreign investors. According to AT Kearney consulting firm, Vietnam may become the next centre of the world’s programming industry. According to Meo IT consulting firm, personnel expenses of Vietnam’s IT industry are 40 percent lower than in China and India.
Regarding exports, Vietnam is particularly strong at electronics, computers and components, footwear and apparels (which, in combination, account for nearly 50 percent of the country’s total exports). Most apparel and footwear companies had received orders enough for operation till the second quarter of 2014. Vietnam was also the top exporter of agriculture such as rice and seafood.
Concurring with this viewpoint, Dr Le Quoc Phuong, Deputy Director of Trade Information and Technology Centre under the Ministry of Industry and Trade, said that the world economy already hit bottom in 2013 and powerful economies did not want to witness this bad context any longer. Therefore, in 2014, the economy is forecast to stage a rally, led by exports and imports.
Looking at policy movement and domestic economic health, Dr Nguyen Minh Phong said the Government and lawmakers quickly adapted to innovation. Hence, at right the beginning of 2014, we saw a series of investment environment reform policies in a bid to catch foreign investment inflows. Macroeconomic policies are more opened, thus providing more options for enterprises.
Strong grip on economic policies
Dr Nguyen Duc Thanh, Director of the Vietnam Centre for Economic and Policy Research (VEPR) under the College of Economics, Vietnam National University of Hanoi, said if we put Vietnam’s economy in a long-term vision, its recovery is short and fragile. So, economic policies should be loosened slowly, not too fast. He noted that, from 2005 to now, we still do not have a truly outstanding growth. In 2013, the growth rate was slightly higher than in 2012. The economy is expected to bottom up in this downward cycle.
However, things are not so simple because our economy has just recovered and remained fragile. On the supply side, agricultural production slowed down while industrial production just slightly edged up and showed no signs of strong rebound. Vietnam’s MPI index, surveyed by HSBC Bank, showed that, businesses continuously trimmed production scale from the second quarter of 2011 to the third quarter of 2013. Industrial production started to revive in early the fourth quarter of 2013. On the demand side, State investment kept falling down until 2013. Consumer demand also slipped since 2009. On the macro level, the economy is still prone to risks. Budgetary balance is unguaranteed because of excessively rapid increase in expenditure, which leads to a decrease in overall decline of the entire economy. If this reality prolonged, it will trigger negative consequences in the medium term and Vietnam will fall into the spiral of debts, which will pile pressures on financial - monetary markets. Dr Thanh said recommended that Vietnam need to adopt flexible policies to realise recovery targets and maintain growth momentums to revive the health of the whole economy. The immediate growth is a good thing but, taking longer terms like 5-10-year cycle into consideration, the economy needs robust changes, particularly in SOE reform, agricultural restructuring, banking restructuring, and basic construction.
Dr Luu Bich Ho, former Director of Development Strategy Institute under the Ministry of Planning and Investment, said Vietnam needs to have accurate basic economic data like GDP, bad debt, public debt and SOE performance in order to work out suitable economic policies.
Anh Phuong
Vietnamese
