Experts predict worsened economy this year

Experts predict a gloomier year for Vietnam’s economy in 2012 as the recession hits rock bottom.
“Stronger measures must be taken to restructure the economy,” director of the Vietnam Institute of Economics, Tran Dinh Thien, told a conference held by the National Financial Supervisory Committee earlier this year.

“The world is on eve of a financial crisis and this has revealed the instabilities of Vietnam in the global economy. It’ll be a very hard year for Vietnam and the recession will reach its bottom.”

Thien said the nation entered the year with a more fragile economic base following the economic downtrend, high inflation and the trade and State budget deficits that took root many years ago.

Thien said stagnation combined with high inflation poses a great danger to the economy that worries economists about a trade-off between growth and stability.

If the Government prioritizes curbing inflation, economic stagnation will grow worse, and if it focuses on curing economic stagnation, inflation will continue climbing up and be out of control.

Thien said the best scenario for this year’s economic development, in which GDP growth will reach 6 percent, will be possible if the world economy grows by 4% and there is an increase of 8 percent in private investment.

But the 6 percent GDP growth target set by the National Assembly, will be far from reach, said the director of the Vietnam Centre for Economic and Policy, Nguyen Duc Thanh. Thanh said that he didn’t expect any economic recovery in 2012.

Although the goal of curbing inflation from more than 22 percent to below 10 percent can be achieved, the interest rate will remain high and enterprises will continue to undergo a stormy time for, at least, the first six months of the year, he said.

According to deputy director of the National Financial Supervisory Commission, Le Xuan Nghia, liquidity shortage is the biggest headache that has to be solved this year for the economy to survive.

He said the banking system had been weakened by rising bad debts, overdue debts and soaring potential risks in liquidity after several years of rapid growth.

If bank liquidity is not improved, the interest rate will not be lowered, the real estate and stock market will stay frozen and bad debts unresolved. This will mean the restructuring of the economy has failed.

“It is time to take strong measures to raise bank liquidity before things get out of control,” Nghia said.

However, he said it was questionable if 12 months were long enough to lower loan interest rates or remove the ceiling interest rate – or to stabilize the gold price.

Meanwhile director of the Vietnam Institute of Economics Vu Viet Ngoan said that the ceiling loan interest rate must be reduced by 4 percent – 5 percent this year to help Vietnam overcome difficulties.

Other financial commentators said that to improve the situation, the Government should continue to tighten fiscal and financial policies while enhancing the restructuring of public investment, the banking system and the State-owned enterprise sector.

Meanwhile, Thanh said the restructuring of the economy would take a long time and be costly and require strong steps to “purify” the system of State-owned enterprises.

A representative from Lien Viet Bank said even bankruptcy must be accepted for long-term development.

During the past four year, the economy of Vietnam has been on a downtrend as macro-economic instabilities increased.

Average inflation in the period was 14.4 percent, fluctuating from 6.9 percent to 23 percent. The average GDP growth rate also witnessed a decrease from 8 percent in 2002-07 to 6 percent.
Tuoi Tre

Tags: Vietnam economic, Vietnam economic growth, Vietnam economy, Vietnam economy 2012