The General Statistics Office (GSO) said Vietnam’s March consumer price index (CPI) fell 0.44 per cent from February, the biggest month-on-month drop in five years. Meanwhile, the country's gross domestic product (GDP) increased 4.96 per cent year on year in the first quarter of 2014, the biggest first-quarter growth in three years. GDP growth in the midst of low CPI and State-funded investment is the convergence of good signals rarely seen in Vietnam's economy.
Although CPI growth pressures will intensify towards the last months of 2014, weighed by monetary - financial easing policy lags, imported inflationary pressures and increased economic activities, the currently low CPI will provide a favourable condition for slashing both deposit rates and lending rates to support businesses and maintain mobilised capital at banks. This is considered an expression of success in curbing inflation and stabilising macro economy. This also opens up a new era that put an end to the chronic disease of high CPI. This allows us to obtain relatively high growth and maintain low CPI and State-funded investment, thus helping us stabilise the macro economy and improve livelihoods of the people.
New developments show a lot of opportunities are available for businesses and investors to develop.
Corporate M&As, project transfers and foreign investment attraction are heated up
According to Government Decree 01/2014/ND-CP dated March 1, 2014, which took effect on February 20, 2014, the current room of 30 per cent applied to foreign ownership at banks may be raised to an unlimited ratio during the restructuring of credit institutions, decided by the Prime Minister for specific case. This decree, plus a number of other supporting regulations, will draw more foreign funds into the Vietnamese financial market to give a boost to the process of restructuring and developing the Vietnamese credit system and force domestic credit institutions to strengthen close cooperation with potential, capable foreign partners. Like corporate M&As, the debt trading market will be stimulated for development. Weaker credit institutions must double their efforts to equitise capital and internationalise standards. This also means that increased competitive and bankruptcy pressures will force domestic credit institutions to transform into joint stock credit institutions, even those with the State holding over 50 per cent of stake. This is the most important message for credit institutions and Vietnamese enterprises in the process of accelerating corporate restructuring under the modern market economy.
Credit market may be significantly improved
Credit growth will still depend on growth room set for the year. The targeted credit growth in 2014 will be 15 per cent, compared with 12 per cent in 2013, as interest rates are expected to decline; companies better manage risks, reduce risky speculative investment, step up restructuring and focus on effective business plans. The credit growth is also boosted by expanded bad debt trading scale, increased provisions for risks of credit institutions through Vietnam Asset Management Corporation (VAMC).
Real estate market with social housing segment warms up
The real estate market has been heated up by increased supply sources, diversified products, more reasonable prices, better credit conditions (lowering interest rates by another 1 per cent on housing loans and adding more eligible borrowers) of the VND30,000-billion support package, continued funding by banks (VND35,000 billion and VND50,000 billion), stronger belief of buyers in cash flow management, project progress, house delivery and housing quality.
Stock market will bring more opportunities and bigger margins
Despite eight securities brokerage companies placed under special supervision, share prices will advance on improved performances of domestic companies, on increased flows of foreign funds, and on increased market confidence, better market control regulations (especially regarding information and administrative penalties), and better investor protection. Vietnam is determined to equitise 430 SOEs in 2014 and 2015.
Foreign exchange market will be further controlled
The fluctuation range of VND/USD exchange rate at 3 per cent a year is a strong commitment by the State Bank of Vietnam (SBV), to be achieved with positive forex reserves and current account balance. The SBV will still hold the sole right to import goals and control speculative acts.
Export markets will be expanded
Vietnam still has a lot of competitive advantages in natural conditions and labour resources, especially in fisheries, agriculture, garment - textile and electronics sectors. More and more goods meet stricter requirements on quality and product origin. Moreover, most of 20 groups of key exports with annual export turnover of US$1 billion are essential. Consumption reduction is unlikely, even when consumer markets are tightened.
In 2014, Vietnam expects to become a top-three 3 shrimp exporter in the world. Labour-intensive exports like export - electronics - computer - accessories and leather - footwear - garment - textile fields, which account for a total of nearly 50 per cent share of Vietnam’s total exports still have high hopes of growth because most garment - textile - footwear companies have received enough orders for operation through the second quarter. In addition, Vietnam will see export opportunities from the clear recovery of the largest export markets like Vietnam, the United States (US), the European Union (EU) and Japan. By signing many trade agreements, Vietnam’s export goods will enjoy lower duties.
New market opportunities
Opportunities will come from the interplay of tax cuts, continued inflation control, macroeconomic stability, trade promotion, information provision, market-seeking support, and inventory settlement.
The restructuring process of State-owned enterprises (SOEs) was boosted in early 2014 after the Government issued a resolution on divestment from non-core businesses. After 2015, SOEs shall report to relevant State agencies for changing State ownership ratio in equitised SOEs. Specially, it is necessary to ensure new motivations for healthy development of equitised enterprises, clearly clarify financial mechanism with public-interest objectives and profit-seeking targets, and resolutely apply equitable credit policies.
Vietnamese
