2012 GDP, inflation targets hard to achieve

Many economic problems are still looming large in and outside Vietnam, making experts at a business forum in HCM City on Monday believe this year would be very challenging for Vietnam to reach targets for gross domestic product growth and inflation.
Many economic problems are still looming large in and outside Vietnam, making experts at a business forum in HCM City on Monday believe this year would be very challenging for Vietnam to reach targets for gross domestic product growth and inflation.

High lending interest rate, low liquidity, declining orders from overseas, and the inefficiency of State-owned enterprises were among the problems that Vietnam had to grapple with in 2012, economists said at the forum.

Economist Le Dang Doanh highlighted problems in the world, including the economic growth of 1.6% this year from 1.9% last year at the Organization for Economic Cooperation and Development, especially the euro area whose GDP growth is projected at a mere 0.2% this year compared to 1.6% in 2011.

The OECD’s reduced economic growth will affect Vietnam’s exports, Doanh told more than 120 representatives of local and foreign companies at the forum. He demonstrated that most local textile and garment exporters were struggling to find orders for the second half of this year, a tough situation that is quite different from last year.

With export revenue growing by up to 38% year-on-year to exceed US$15.6 billion last year, the textile and garment topped the list of 23 exports product categories registering outbound sales of more than US$1 billion, according to the Ministry of Trade and Industry.

Vietnam saw export turnover jump by 33% to US$96.3 billion last year. The ministry announced the 2012 target of US$108 billion this year, a year-on-year increase of some 13% given economic and debt woes in Vietnam’s major export markets, including the United States and Europe.

With a slower rise in exports, the strict control on credit growth, limited State funding for infrastructure development in Vietnam and a tougher 2012 for the world’s economy, the Government’s GDP target for 6-6.5% this year will be a hard nut to crack.

“I think GDP growth of 6% is very good for 2012,” Doanh told on the sidelines of the forum, organized by the global body for professional accountants ACCA. He noted how to mobilize investment capital from the private sector efficiently to complement the State funding was one of the keys to achieving the GDP expansion of 6%.

Andy Ho, managing director of VinaCapital Investment Management Ltd., presented VinaCapital’s forecast at the event that Vietnam’s economy would grow 6% in 2012 over 5.89% last year.

Ho said the lower GDP growth compared to the average rate of 7.1% over the 2000-2011 period is ascribed to continued austerity measures, the impact of 2011 monetary tightening and macroeconomic stability prioritized above GDP growth.

As a result, VinaCapital projected that inflation would trend down to 12-14% by the end of 2012, which is still higher than the Government’s aim for this year’s consumer price index of less than 10%.

Economist Doanh commented that keeping inflation at a single-digit rate this year would be an exceptional achievement. But, this requires the world’s favorable conditions as well as effective monetary policies and a cut on State spending in Vietnam.

“What matters most is the Government’s determination,” Doanh told.

Asked about the major challenges for the business community in Vietnam this year, Pham Hong Hai of HSBC Bank (Vietnam) Ltd. said liquidity would be one of them given the global uncertainty as well as the difficult access to bank loans and high interest rates in Vietnam.

“We do not expect the outlook for this year to be rosy,” Hai told the forum. The head of global markets at HSBC Vietnam added that it was certain that 2012 would be the year of uncertainty.

“With the ongoing euro crisis, debt ceiling issue in the U.S., slowdown in emerging markets and restructuring in Vietnam, business will need to be very cautious. Those businesses that could take advantage of market opportunities such as consolidation/merger and acquisition (M&A) and overcome challenges such as tight funding/liquidity will succeed in 2012.”

Ho said VinaCapital planned to either divest capital from certain projects or raise funds from overseas to invest in four to five companies this year as opportunities were opening to those investors who are able to manage cash. He noted raising capital from overseas continued to be difficult this year as investors now had more options for attractive equity in China, Brazil and Indonesia.

Saigon Times

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