The Vietnamese economy showed positive signs in 2009 and the first four months of this year. However, challenges exist requiring measures to stabilise the macro economy, ensure social security, national defense, security and gross domestic product (GDP) growth at 6.5 percent in 2010.

More positive signs

A governmental report on the economy and society in 2009, which was presented at the Seventh Session of the National Assembly starting May 20 shows that 17 of all 25 goals were reached or exceeded. Several achievements were higher than those expected at the Sixth NA Session, regarding the economy and society in the first nine months of 2009 and the development plan for 2010). Specifically, the GDP increased 5.32 percent in 2009 compared with 5.2 percent expected at the Sixth NA Session; export revenue fell just 8.9 percent compared with 9.9 percent; development investment capital made up 42.7 percent of the GDP compared with 42.2 percent; and the consumer price index (CPI) in December 2009 increased 6.52 percent against a year ago compared with 7 percent.

The economy grew 5.83 percent in the first quarter of this year, higher than in 2009 and 1.9 times the growth in the same months last year. Many sectors increased rapidly from the same period last year such as industrial production going up 13 percent, total retail and consumer service revenue up 26.5 percent, exports up 8.9 percent and foreign tourist arrivals up 35.7 percent.

The CPI in the first four months of this year increased 4.27 percent against December 2009 standing at 1.36 percent in January, 1.96 percent in February, 0.75 percent in March and 0.14 percent in April. As normally, the CPI in Tet (Lunar New Year holidays) season increased faster than in the rest of the year.

Budget revenue came to 158.8 trillion dong in the first four months of this year reaching 34.4 percent of what was expected and increasing 12.8 percent from a year ago. Domestic budget revenue was about 108.08 trillion dong contributing 34.6 percent of what was expected for the year and increasing 11.8 percent against a year ago. Crude oil revenue came to 19.7 trillion dong meeting 29.7 percent of what was expected for the year and increasing 4.5 percent from a year ago. Budget revenue from import-exports was about 48.82 trillion dong, 37.1 percent of what was expected for the year and up 27.8 percent from a year ago.

Budget spending amounted to 175.04 trillion dong, 30.1 percent of what was expected and up 15.2 percent from a year ago.

Budget overspending was about 16.24 trillion dong, 13.6 percent of what was expected for the year. The surplus came from domestic and foreign loans.

Challenges are many

However, eight goals for 2009 failed. The GDP in 2009 was the lowest in the last 10 years. The macro economy was not really stable, with budget overspending making up 6.9 percent of the GDP. The balance of government outstanding loans increased rapidly, while import-export revenue plunged and the trade deficit was fairly high. The quality of human resources is low.

Epidemics and serious droughts in the first four months of this year also hindered farming and power production in the north. Imports continued to increase faster than exports leading to high trade deficit, which was 23.1 percent of export revenue. Foreign direct investment (FDI) and official development assistance (ODA) capital was invested slowly. The cost of fuel, power and services increased.

Necessary measures

To overcome the challenges, it is needed to put in place measures to stabilise the macro economy and manage the state budget from now to the end of the year to curb inflation, ensure better social security and national defense and see the economy grow by 6.5 percent. The government has devised five major measures for submission to the NA for adoption at the Seventh Session. First is to manage the policies on money, interest and exchange rates in a flexible and effective manner to keep up with the need of the economy, ensure liquidity for the banking system and encourage exports. Second is to boost exports, limit the import of products that can be made in Vietnam and unnecessary consumer goods to reduce the trade deficit, boost the disbursement of foreign investment capital sources and improve the payment balance. Third is to closely watch changes in the market and prices to intervene to keep prices stable and control inflation. Fourth is to collect more state budget than what was expected for the year and manage state budget spending. Fifth is to try to settle problems to make use of government bonds.

Vietnam Economic times