The Economic Review 2009

The biggest achievement of Vietnam’s economy in 2009 was its positive growth rate in the face of difficulties, an achievement only a few Asian countries could boast this year.

Here are the six most outstanding features of Vietnam’s economy in 2009, according to VnMedia.

Overcoming economic downturn with growth

For Vietnam, the lowest point of the economic crisis was in the first quarter of 2009, when the GDP growth rate was just 3.1 percent, the lowest level in the last few decades. Production, trade, service and export all fell into stagnation.

Thanks to a series of economic stimulus measures, including the interest rate subsidy programme, tax payment delay and tax reduction, and the loosened monetary policy, Vietnam’s economy made a strong recovery. It began to stabilize in the second quarter of 2009 and recovered strongly in the last two quarters to obtain a GDP growth rate of 5.2 percent for all of 2009. This is an impressive statistic for an Asia country and also globally.

Vietnam sees record ODA commitments

The encouraging results in dealing with the economic crisis were hailed by international donors, who pledged a record ODA (official development assistance) of over eight billion dollars for Vietnam in 2009.

The ODA numbers show that the international community believes that Vietnam is dealing well with the crisis, making effective disbursements and has good economic prospects. The large sum is especially significant nowadays, when the world is still facing economic woes and and capital is not easily accessed.

The donors expressed optimistic views about Vietnam’s economy at the Consultative Group Meeting held in Vietnam in early December 2009, saying that the 2009 business environment in Vietnam was the best in the last three years. 80 percent of enterprises plan to expand business in the upcoming three years.

As such, the capital committed to Vietnam has increased yearly. In 2005, Vietnam received $3.7 billion, while the figure rose to $4.4 billion in 2006, $5.426 billion in 2007 and over six billion dollars in 2008.

Sharp rise in dong/dollar exchange rate, gold price

The year 2009 witnessed the chaos in the gold market. The gold price was 18-19 million dong per tael at the beginning of 2009 and rose to 29 million dong per tael in December, before stabilizing at 26-27 million dong per tael now.

Domestic gold prices were always higher than the world’s prices and gold trading companies were the biggest beneficiaries.

Vietnamese investors tend to follow the crowd, which spurred on by rumours, led to “gold price fever attacks.” The herd mentality explains why the domestic gold price dropped dramatically by two million dong per tael right after the State Bank of Vietnam allowed gold imports to resume, even though the world’s price did not decrease.

Chaos was also seen on gold trading floors, where investors traded gold on accounts. Gold investors complained about the “troubles in the transaction systems” that made them lose tens of billions of dong. The gold trading floors will be shut down by March 30, 2010.

The foreign currency market was hotter than ever before in 2009. The dollar price escalated, while businesses complained they could not purchase dollars to pay import deals. The Government had to take strong measures to cool the foreign currency market down, asking state-owned corporations to sell the dollars they had to banks.

The black market’s dollar price is now at 19-20,000 dong, while commercial banks are quoting the dollar price at 18,500 dong per dollar.

Vietnam’s rice exports reached record high

According to the General Statistics Office, Vietnam exported over six million tonnes of rice in 2009 with the export revenue of $2.74 billion. The export volume represents a 33 percent increase in comparison with 2007 (4.5 million tonnes) and 30.4 percent in comparison with 2008 (4.6 million tonnes).

However, trade analysts have pointed out that Vietnamese farmers see few benefits. According to the Vietnam Farmers’ Association, traders, who undertake 10 percent of jobs in the rice production chain, still take 67 percent of the profits.

Stock market fell, then recovered rapidly

Bearing the impact from the global economic recession, the stock market hit its deepest low in the last four years, with the VN Index dropping to 235.5 points on February 24.

After the economic stimulus measures, the VN Index began rising, climbing to 630 points in late October and now hovering around 500 points.

Economists believe that the VN Index decreased in the last days of 2009 because they worry about bank policy on tightening credit. Investors hope that the market will warm up again, when banks and finance companies announce credit limits for 2010. As the credit growth rate for 2010 is curbed at 25 percent, no one expects a boom in capital disbursement.

Real estate market bustling

The real estate market bustled in the second and third quarters of 2009 before it quieted in the fourth quarter.

2009 was a good year for real estate projects. Large investors launched big projects: Nam An Khanh, Bac An Khanh, Ecopark, Diamond Park and Villa Park in Hanoi, and Blooming Park, The Vista, Riverside in HCM City.

The “land price fever” in areas west of Hanoi has led to price increases in other parts of the city.

Many foreign direct investment projects in 2009 were also in the real estate sector, with registered capital of $7.6 billion.

VietNamNet/VnMedia

Tags: Vietnam economy news