“The economy has bottomed out of crisis and has shown signs of recovery. However, the recovery is still fragile and coupled with enormous risks,” said economic experts at the seminar "World and Vietnam Economy: Economic 2014 Review and 2015 Prospects” organised by Vietnam Prosperity Bank (VPBank).
Escaping crisis
Macroeconomic stability and development prospects are common concerns of the business community in 2015. Mr Nguyen Duc Vinh, General Director of VPBank, said: "For the time being, business managers and chief financial officers of companies and banks like us are working out development plans for 2015. Our common question is how the economy will be in 2015?"
Sanjay Kalra, Resident Representative of the International Monetary Fund (IMF) in Vietnam and Laos, said “The country's economic growth and macroeconomic stability have shown remarkable improvement. Nevertheless, risks have been huge as debt has been a concern while business effectiveness of State-owned enterprises stirred challenges for Vietnam’s financial risks. The banking sector should also be restructured and merged to ensure a system that was strong enough to improve bad debts. The economy needed reforms to improve output and quality.
According to the IMF, global GDP is forecast to reach 3.3 percent this year, a 0.4 percent lower than the previous forecast because difficulties arising from the global economic crisis remained, coupled with unpredictable changes in the financial market. The IMF projected that global GDP will reach 3.8 percent next year because of world-wide recoveries in spite of vulnerabilities and unevenness.
In Vietnam, the major problems of the economy are still in existence. Bad debt has not been solved thoroughly. Public debt becomes a hot topic because of its rapid growth and wasteful public investment. However, the macroeconomic stability is maintained and the government is committed to accelerating economic restructuring.
One other bright spot of the economy are the growth in agriculture, industry, services and other fields. The real estate market has shown signs of recovery, driven by increased direct and indirect investment flows.
Stagnant domestic sector
Dr Tran Dinh Thien, Director of the Vietnam Institute of Economics, believes that difficulties are still ahead for the economy. “The economy's recovery remains fragile. It is said that industrial growth is better but who contribute to this growth? The same reality is also seen in export growth. Indeed, these growths are driven by foreign direct investment sector. This means domestic businesses remains weak. We need solutions to boost the development of domestic enterprises.”
At the Fall Economic Forum held by the Economic Commission of the National Assembly in September 2014, economist Truong Dinh Tuyen sharply commented that the economy has escaped the bottom and is struggling to go up but aggregate demand remains weak, bad debt is not resolved effectively and tends to increase. Credit cannot reach the economy.
The Vietnamese economy relies heavily on foreign direct investment (FDI) and on exploitation of raw materials. Intrinsic forces of the private sector remain very feeble. This sector will continue to be pinched if Vietnam pursues growth acceleration because the Government will be forced to increase public investment, which will result in an increase in public debt. The Government will have to issue bonds to fund its investing and this will squeeze credit for businesses and increase interest rates while credit growth slows down. Businesses will continue to be sent into dilemma when Vietnam pursues the path of high growth.
To support the private sector development, an economic policy must eye maintaining stability with low inflation and moderate growth of below 6 percent a year. The Government will continue to promote SOE restructuring and debt reduction by selling shares in State-owned enterprises, promote credit growth and keep the value of Vietnamese dong. The private sector needs to have an easier access to capital and cheaper capital expenses to raise profitability. In this regard, Dr Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management (CIEM), said that the Vietnamese economy has shown positive and negative signs. However, Vietnam should focus on maintaining sustainable growth instead of fast development.
Le Minh
Vietnamese
