Vietnam 2010 BoP deficit estimated at $4b

Vietnam’s deputy prime minister Nguyen Sinh Hung reported the balance of payments deficit of Vietnam in 2010 is estimated to have reached about $4 billion.

At a briefing meeting of the government in late 2010 December 31, 2010, the deputy PM gave an overview statement about Vietnam’s economy in 2010, and the key tasks of 2011. In particular, the national economy has made positive changes such as GDP growth exceeded targets, rising exports,… but there were still many weaknesses to overcome such as the balance of payments (BoP) deficit, the slow shift of economic structure, high inflation etc.

Economic Overview 2010

Looking back in 2010 compared with the government targets set out early, the basic economic indicators have achieved good results. This is good news for the economy. The Congress set a target GDP growth of 6.5 percent, but Vietnam reached the growth of 6.78 percent by the end of 2010.

Besides, the macro-balance criterion was improved as tax revenues exceeded 14.12 percent of budget targets to reach more than 60 trillion dong, export grew 25.5 percent, import trade was curbed at $12.3 billion. “However, Vietnam ongoing trade deficit was regarded the weakness of our country,” Hung said.

This year, Vietnam’s foreign investment attraction failed to reach the Congress goal, but Vietnam was still the positive destination of foreign investment, and ODA still achieved approximately $8 billion.

According to Hung, the World Economic Forum highly appreciated the improvement of Vietnam’s business environment as it raised the environment up by 16 steps to stand at 59th in its ranking index, which was a good news. Average income per capita reached $1,168.

While the world economy recovered slowly, and US economic growth reached about 2 percent, Japan and Europe about more than 1 percent, therefore, these countries continued with economic stimulus packages. But so far Vietnam has cut the economic stimulus package. With the cut stimulus package, Vietnam has saved about 30 trillion dong for tax exemptions, some 14 to 15 trillion dong bank interest rate support, reduced the support from government bonds from 65 trillion dong to 50 trillion dong.

With such economic growth, Vietnam will have economic potential to develop sustainable economic and social stability. World experts assessed Vietnam has achieved higher economic growth rates in recent years, rapid recovery after the crisis.

However, according to general assessment of the deputy PM, not to macroeconomic stability, Vietnam’s economic structure transformation was slow. Support industries were in the slow development, and the country lacked US dollars to import, which caused more pressure on the exchange rate.

That showed some weaknesses of Vietnam as the National Assembly, the government operated the economic policy aggressively, but not really effectively. The administration of the government and the Governor of the State Bank was not really consistent.

Prices, inflation soared highly as the macroeconomic stability actually was not ensured, along with high input costs mainly due to imports of raw materials for production such as chemicals, fertilisers, supplies, machinery, raw materials etc.

Besides, in 2010 the balance of payments deficit of the country was estimated at $4 billion. Though improved compared to 2009 (US$8.8 billion), a detailed calculation showed that the figure was at about $2.5 billion, due to remittances of $8.4 billion, FDI, FII (cash flow to the stock market alone was about $1 billion), ODA that Vietnam has achieved good results.

In sum, according to Hung, Vietnam’s macroeconomics was not really stable, and inflation, interest rates were still high.

Key tasks in 2011

The government say that the year 2011 is a good time for Vietnam’s socio- economic development. With GDP per capita at $1,168, Vietnam now has entered into the group of the medium income nations.

In 2011, there are still many challenges in the world economic forecast, so exports will be more difficult and travel will fall. In that situation, the government has given the message to 2011 with four key objectives:

- Continue macroeconomic stability, inflation control.

- Renew growth model status, changes in economic structure, creating a fast and sustainable development, striving to achieve GDP growth target from 7 to 7.5 percent.

- Continue to ensure social security, poverty reduction, cultural development, health, education.

- To ensure national defense and security, strengthening the external position improved in the international arena. – CafeF