Business community voices rosy economic outlook

Despite a number of obstacles, Viet Nam will continue to be one of the fastest-growing economies in Asia, with the Government targeting a 7-7.5 per cent GDP-growth rate, according to experts speaking at a corporate gathering in HCM City last Thursday.

This followed the positive end of last year with an across-the-board increase in all fields, said HSBC chief executive officer Tom Tobin at the event, the first international business luncheon of the New Year.

The event, with its theme The Year Ahead: Executive Summary and Outlook 2011, brought together well-known speakers from different sectors who reflected on opportunities as well as challenges for the coming business year.

Tobin said that GDP rose 6.78 per cent last year; agricultural, forestry and fishery production value 4.7 per cent; industrial production value 14 per cent; retail sales of goods and services 24.5 per cent; total export turnover 25.5 per cent; and total import turnover 20.1 per cent.

For this year, industrial production and retail sales remain bright spots, but inflation and the trade deficit remain key challenges.

The financial services sector has been at the forefront of opening up of markets, with the banking system targeting a 23 per cent credit growth in 2011.

Tobin said a surge in demand for project finance and corporate lending would occur, and proposed that the Vietnamese Government devise a longer-term strategy to reform the banking industry.

The Government should also improve efficiency and transparency in banking operations and provide specific regulations for implementation of new laws, he added.

Foreign direct investment seemed to be losing steam as investors turned cautious, he said.

Tobin said the top three priorities for this year should be stabilising the macro-economy and controlling inflation; hastening economic restructuring and changing the growth model; and creating favourable conditions for business development and expansion of markets and investment in production.

The Government should impose further monetary tightening to rein in inflation and import demand.

Speaking at the event, VinaCapital Group CEO Don Lam touched on three issues that would continue to be challenges for 2011: higher food and fuel prices, currency stability and liquidity concerns.

Lam said the Government had pledged greater policy transparency with a decisive shift in policy focus to ensure macro-stability.

The 7-7.5 per cent target for this year’ s GDP growth could be reached, while it would be hard to achieve 7 per cent in inflation, he added.

FDI disbursement would continue on pace at $11-12 billion, and FDI and Foreign Indirect Investment (FII) commitments should rise.

He noted that the country would anticipate a 3-5 per cent devaluation of the dong after the Lunar New Year and the currency would depreciate 5-7 per cent against the US dollar for 2011.

The trade deficit would climb to $14 billion, as higher exports would require more imports.

In real estate, Lam said that the mid-range residential market would see an oversupply of condos, but villas and townhouses remained strong, particularly in the second half of 2011 if liquidity improved.

He said liquidity would improve as FII was expected to rise and banks had stronger balance sheets due to increased charter capital.

The improving liquidity also resulted from fewer restrictions imposed on securities’ lending this year than in 2010, and declining and stabilising gold prices would lead investors to move into other asset classes. The office sector would have a serious oversupply while rents would drop further.

Lam said that in 2011 with hospitality recovering, tourism arrivals were expected to be strong.

Though the Vinashin case had had a serious impact on the ability of major State-owned enterprises to raise international USD bonds, he said the domestic bond market was unaffected by this.

Lam predicted the domestic bond market would be strong this year, with the bond market re-organised and trading more efficient and transparent.

Last year saw $400 million poured into the domestic bond market, which is expected to expand this year.

In addition, the VN Index should pick up slightly after the new Government is announced. It stood at 495 in early January, and is expected to have a 15-20 per cent upside in 2011.

Lam noted this year’s challenges would be the high cost of debt and devaluation concerns.

Forecasts

Ralf Matthaes, managing director of market researcher TNS, predicted that the Viet Nam market would continue to grow, but at a slower pace than during the pre-global economic recession.

He said domestically 2011 would be slightly better than 2010 if the inflation rate falls, the trade deficit narrows and banking liquidity increases.

Internationally, Viet Nam should benefit in 2011 from increased exports, FDI and State-owned enterprise efficiency.

He said both exports and FDI should show stronger growth as global economic conditions improve and consumer spending increases.

The most desired purchase items include washing machines, personal computers/desktops, air conditioners, digital cameras, cars, LCD/ plasma TVs and laptops.

Matthaes said consumer confidence would register only an insignificant increase this year, but would be exceeding the 2010 level of 78 index points.

He said there would again be an increase in trade as consumer confidence increases.

Matthaes, however, noted that the major concerns for consumers in 2011 was the value of the Vietnamese dong, with 57 per cent saying it would become worse this year.

From December to pre-Tet, a consumer spending spree was expected as consumers try to cash in on pre-VNDdevaluation fears, which might also increase inflation substantially in the first quarter, he added.

He said cautious optimism was still key, but that growth should exceed 2010 levels.

Consumers have held off purchasing more expensive big-ticket items over the last two years as they have saved more money.

But with more funds available in 2011, spending on those items should increase, he added. — VNS

Tags: Vietnam business