Macroeconomic stability to be the key for growth: expert

The world economic picture will continue to be a state of turbulence with hidden dangers in 2012, said renowned economist Le Dang Doanh at a recent conference.

“Robert B. Zoellick, the 11th president of the World Bank Group (WB), said the global economy has fallen into dangerous times,” at the Super Investor Day 2012.

“In addition, Bert Hofman, WB Chief Economist for the East Asia-Pacific region, could not give me the answer to how dangerous the situation really was when I asked him last Tuesday.”

“In my opinion, the biggest issue is how the eurozone crisis could be tackled in an orderly way,” he said.

“Among the three leading economies, US, Japan and China, the coming presidential election will limit the policy maneuverability of President Barack Obama.”

“While the high public debt of Japan will put real pressure on its economic performance, both Japan and China have suffered from the downside of falling world aggregate demand with slower growth and exports.”

“Given this global situation, domestic firms, as many have suggested earlier, should brace for tough times ahead.”

“Locally, I think macroeconomic stability should be considered the key, offering businesses a firm stance in 2012.”

“As the government is expected to cut more spending and investment this year, raising productivity is the key to maintain projected gross domestic product (GDP) growth of 6-6.5 percent.”

“We have some certain advantages as many Indian, Korean, and Japanese enterprises have showed their interest in buying stakes in Vietnamese firms.”

But, as many import products from Asian countries, including some 800 import items from China, will enjoy tax cuts, domestic products will face fiercer competition this year.

Given all solutions proposed and carried out by the government, in my opinion, 12-percent inflation is more possible than the 9-percent targeted by the government.

“The exchange rate between the US dollar and the Vietnamese dong is also a factor to be paid attention to.”

“As the latter devalued by 18.58 percent in 2011, the dong, in fact, appreciated 9 percent against the greenback given the forex rate adjusted only 10.2 percent during the same time.”

“It will be a burden for local exporters this year, especially when the central bank said the forex raise will be adjusted at the most by 3 percent this year,” he said.

With a projected credit growth of 15-17 percent in 2012, compared to 12 percent in 2011, credit constraints for manufacturing sectors will persist.

Recent trade surplus reported in January is, consequently, caused by about 50,000 dissolved firms who had stopped importing raw or semi-processed materials to make export goods.

“Power companies have also reported falling demand in January.”

“So, I think there are around 200,000-300,000 laborers having been laid off due to the mass bankruptcy.”

“As a result, the restructuring of the local economy must be quickened.”

Upsides out there

The restructuring of the local economy this year will have its upsides, as consulting and software firms will have more opportunities to join the game.

The relaxing of credit for some segments of the real estate market can help ease the liquidity constraints for both buyers and sellers , and bankers as well.

“Macroeconomic restructuring must be coordinated, mostly important in the level of policymaking and government structure,” Doanh said.

“As the Prime Minister has pledged there would be no bank dissolution this year, and asked all state-owned economic groups to withdraw VND20 trillion from the non-core sector between now and 2015, there will be more room for the private sector to grow.”

“All state-owned enterprises (SOEs) have all been asked to cut operational costs by 5 percent this year, which can also be considered a timely move of the government to tackle their chronic financial discipline problems.”

Source Tuoitrenews

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