Maintaining Stability and Growth

In 2014, Vietnam achieved an estimated growth of 5.98 percent against 2013. Estimated export turnover in 2014 reached US$150 billion, up by 13.6 percent against 2013, of which the domestic economic sector reached US$48.4 billion, up 10.4 percent, the highest growth since 2012 and contributed 3.5 percentage points to the general growth; the FDI sector (including crude oil) gained US$101.6 billion, up 15.2 percent, contributed 10.1 percentage points. The import turnover reached US$148 billion, up 12.1 percent from the previous year. Industrial Production Indexes (IIP) grew by 7.6 percent from 2013.

 

Average CPI in 2014 rose 4.09 percent compared to that of 2013, a relatively low increase in the past ten years.

 

Whether Vietnam has escaped from economic crisis and entered the recovery phase or not remains controversial. Major economic woes remain to be in sight. While bad debt has not completely settled; public debt has become a burning conundrum because of its rapid growth and wasteful investment. However, bright spots are the macroeconomic stability and the Government’s commitment to accelerating economic restructuring.

 

Key indicators are showing signs of economic recovery, from agriculture, industry and services with high growth prospects to reviving real estate market, increased direct and indirect investment flows.

 

Sanjay Kalra, Resident Representative of the International Monetary Fund (IMF) in Vietnam and Laos, said “Vietnam has made a significant progress in economic growth and macroeconomic stability but risk remains high. Vietnam's public debt is worrisome while the performance of State-owned business sector is still raising fiscal risks for Vietnam. The banking sector needs to be restructured and merged to build up a strong enough banking system and improve bad debts. [The country] also needs to restructure the economy to boost up productivity and quality.”

 

According to experts, the Vietnam’s economy will be brighter in 2015 but it remains challenging. Dr Tran Dinh Thien, Director of Vietnam Institute of Economics, said that Vietnam had experienced a period full of difficulties and the coming period would not be easy. The recovery of the Vietnam’s economy is still fragile,” he said. According to Mr Truong Dinh Tuyen, former Minister of Trade (now MoIT) Vietnam's economy will have a higher growth rate in 2015, expected at 6-6.2 percent, while inflation is projected to stay below 6.5 percent.

 

Vietnam’s economy relies too much on foreign direct investment (FDI) and crude material extraction. Internal economic forces from the private sector remain very weak. This sector will continue to be squeezed if Vietnam pursues its accelerating development path. Since the Government will be forced to increase public investment, this will consequentially result in an increase of public debt. The Government will have to issue bonds to finance its investments, give rise to credit squeeze for businesses and an increase in lending interest rates in the time of slowing credit. Businesses will continue to be in difficulty when pursues high growth path.

 

The way to maintain economic stability and support business development is supported by many. The private sector should have an easier access to capital and lower capital costs to increase profits. Dr Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management (CIEM), said that the Vietnam’s economy is showing both positive and negative signs. In the short term, however, Vietnam should concentrate on maintaining economic stability rather than promoting rapid growth.

 

Although there are controversies about whether the economy has really recovered or not and Vietnam should continue with follow the path of rapid growth or maintain stability, economic experts agree that the entrepreneurship has declined to a very low level. Mr Dau Anh Tuan, Director of Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI), highlighted the disappearance of big private companies.

 

He added that "The room for reforming the business environment is very broad when a series of business conditions and business industries have been reviewed. The matter is the thinking for the sake of businesses, the support and condition of policymakers for creating a favourable business environment."

 

CIEM Director Nguyen Dinh Cung suggested that "The currently immediate solution is that the Prime Minister and heads of central and local authorities must support enterprises to stimulate their waning entrepreneurship. Signals from reform messages concerning business conditions and administrative procedures will be the best signals for investors and businesspeople to revive their inherent dynamism.”