The online extended regular press conference of the Government of Vietnam for June spent much time analysing tough issues like interest rate cuts for businesses, changes in agricultural growth patterns, and stability and harmonisation of macroeconomic development objectives.
Economy shows optimistic signs
Mr Bui Quang Vinh, Minister of Planning and Investment, said most growth indicators of all sectors and fields improved, helping raise gross domestic product (GDP) growth to 5 percent in the second quarter, higher than the first-quarter growth, and bringing the six-month GDP growth to 4.9 percent. Inflation was curbed and consumer price index (CPI) marginally increased. After many consecutive years, CPI dipped in recent months. Inflation is no longer a major concern in 2013 and is likely to be contained lower than in 2012. In the last six months of 2013, the potential appearance of price-affecting factors will require close control and good balance of input prices like electricity, petroleum, fertiliser and other essential consumer goods.
Notably, exports which added much surplus value to the economy also expanded steadily. Specifically, export turnover always increased at a double-digit rate. Export value averaged at over US$10 billion a month, grossing US$62.1 billion in the first six months ending in June, up 16.1 percent year on year. In detail, foreign-invested sector earned nearly US$37.4 billion (exclusive of crude oil), accounting for more than 60.2 percent of the country’s total exports and rising 28.3 percent year on year. The domestic investment sector saw the on-year growth of 2.2 percent. Import spending, especially on commodities, machinery and equipment for production, gradually increased on strong demand for electronic parts and garment – textile materials. Import value grossed US$63.5 billion in the first six months of 2013, up 17.4 percent year on year. Particularly, foreign-invested sector expended US$35.7 billion in the reporting period, accounting for 56.3 percent of total imports and upping 27.8 percent, while the domestic investment sector’s imports expanded 6.3 percent. Trade deficit was thus US$1.4 billion in the January-June period, or 2.3 percent of total exports, a low, controllable rate. The foreign-invested sector enjoyed a trade surplus of about US$1.65 billion (exclusive of crude oil) or US$5.4 billion (inclusive of crude oil).
Calling for lower rates for businesses
At this meeting, local leaders courageously suggested the Government introduce policies to slash interest rates to support enterprises to seek capital to revamp production and business. Particularly, mayors of Hanoi and HCM City anticipated that finance for businesses is the most important task from now to the end of this year. Mr Nguyen The Thao, Chairman of Hanoi People’s Committee, proposed reducing interest rates, extending credit maturity, stimulating consumption and increasing public investment to boost purchasing power of the entire society.
Mr Nguyen Manh Hien, Chairman of People’s Committee of Hai Duong province, said up to 20 percent of enterprises in his province had gone bankrupt or ended operations. Although Hai Duong province completed 51 percent of budgetary revenue collection in the first six months, difficulties against companies need to be removed.
Mr Le Phuoc Thanh, Chairman of People’s Committee of Quang Nam province, said, as our extensive economy heavily relies on capital, capital shortage will lead to production stagnation immediately. He pointed out that borrowing money from banks is now the hardest difficulty for enterprises because of their high bad debts and inventories.
Mr Trinh Van Chien, Chairman of People’s Committee of Thanh Hoa province, frankly admitted that rigid monetary policies are necessary in the current context of global and domestic volatility. He also recommended the Government take into account support measures for weak, capital-short companies to have the chance to recover. When a locality tries to support enterprises, banks should give a helping hand. He added that reduced public investment policy stalled many projects and trapped many construction companies. The Government necessarily allocates capital for vital projects to save some businesses.
In response to questions raised by local leaders, Deputy Governor Nguyen Dong Tien of the State Bank of Vietnam (SBV) said deposit interest rate has dropped 2-3 percent since early this year. The subsequent decline in lending rates has also supported the economy a lot. Given current CPI development, the State Bank may reduce interest rates further. Lending rates can be immediately lowered to 9 percent per annum to priority areas (currently, many projects borrowed money with an interest rate of 7 – 8 percent per annum). Deposit rates can be brought from 7.5 percent down to 7 percent per annum and no cap is placed on deposits with maturity term of six months or higher. Old credit contacts will also have rates revised, basing on realities, to support businesses.
Changing agricultural growth patterns
According to the Ministry of Planning and Investment, the production value of agriculture, forestry and fisheries increased 2.2 percent in the second quarter, lower than 2.6 percent the first quarter, because rice output harvested in the second quarter was counted for the first quarter and meat output in the second quarter dropped over the previous quarter. This sector’s growth was forecast at 2.4 percent in the first six months, the lowest in 10 years. Particularly, agriculture expanded 2.2 percent, up forestry enlarged 5.7 percent, and fishery augmented 2.5 percent. Minister Vinh said the biggest hardship of the agricultural sector is demand contraction and low rice price. Therefore, to support the domestic agriculture, the Government needs to take measures to prevent the import of agricultural products the country can make. The import of foreign farm products helps stabilise the market but it affects domestic production, especially livestock husbandry. In addition, the Government needs to soon publicise agricultural restructuring scheme for localities to follow.
Before numerous difficulties, Agriculture and Rural Development Minister Cao Duc Phat pointed out that the most urgent task at present is to expand consumer markets, especially export markets. The value of agricultural production will rise if rice, coffee, rubber, tra fish and shrimp are exported. On the other hand, the ministry will continue coordinating with localities to ward off agricultural smuggling. The agriculture restructuring scheme was already adopted by the Prime Minister and was expected to be deployed soon.
Deputy Prime Minister Nguyen Thien Nhan said that Vietnam previously applied the “two increases” model to develop agriculture, i.e. increase output and increase capital but the current model will be based on “one decrease, one increase, two serves, and three supports.” Or in other words, the new model reduces costs; increases quality; serves the market and serves the objective of efficiency; and supports consumption, supports capital and supports branding. Regarding rice growing land, Prime Minister Nguyen Tan Dung directed that land for flower, rice and grass growing can be levelled off to return soil for rice cultivation. Every year, Vietnam has to spend billions of US dollars importing corns and soybeans to feed animals. Rice soil can be transformed to plant these two crops. However, any change in crop must be careful consideration and close direction.
Anh Phuong
Đăng ký: VietNam News
