Looking back on difficulties that Vietnam’s economy faced in 2013, Dr Tran Du Lich, Deputy Head of Ho Chi Minh City National Assembly Delegation in charge of economic issues, member of the 13th National Assembly, and member of the National Advisory Council for Financial and Monetary Policies, said Vietnam’s economy will witness better changes in 2014.
Particularly, the most important is the expectation for the market confidence restoration. 2013 was the 6th year since the macroeconomic instability started. The Vietnamese Government has adopted a series of measures to cope with problems in those years, notably the response to inflationary pressures since early 2008.
Vicious circle
In 2012 and 2013, aggregate demand-trimming measures affected purchasing power and economic growth. Corporate terminations, bankruptcies and dissolutions increased from early 2012 to 2013. Vietnam’s banking system faced domino collapse in the fourth quarter of 2011 due to the loss of liquidity of weak banks. Bad debts rapidly accumulated, especially real estate credit, and excessive funding for big economic groups, including the private sector, heightened credit risks and worsened financial resource distribution. From the second quarter of 2012, the economy was ailing and anaemic but it could not receive the blood. A gloomy economic picture with a lot of anxieties was seen in 2012 and most of 2013.
From early 2013, with the Resolution 01 and the Resolution 02, the Government of Vietnam continued to focus on curbing inflation, stabilising macro-economy, and ensure social security. Anticipating that inflation remained high, Vietnam continued its tight monetary policy in the spirit of Resolution 11 (taking effect in the first quarter of 2011). Aggregate demand of the economy improved to a certain extent but it generally remained stagnant.
From 2008 to now, given macroeconomic instability, constantly changed monetary and financial policies (sometimes tightened, sometimes loosened) disoriented the market in the long term. The underlying causes remained improper economic structure and two-side effects of fiscal and monetary solutions. Since early 2012, the economy has appeared to fall into a vicious circle: Weakening purchasing power – growing inventories – shrinking production – rising bad debts – declining credit. Thus, in 2013, the economy faced four challenges: (1) Potential return of inflation accompanied by stagnant market narrowed the “room” of fiscal and monetary policies; (2) With unimproved bad debt situation, credit flows were blocked while the economy could not consume the capital. While banks had excess money, companies seriously lacked capital. Access to capital for businesses remained difficult, especially SMEs; (3) as inflation growth was expected 7 percent, restricted deposit rate cut amid relatively high lending rates, despite several slashes, discouraged companies from borrowing money for market expansion; and (4) efforts to warm up the real estate market did not bring desired results and market liquidity did not improve. Once the liquidity on the property market did not improve, bad debt clearance at commercial banks remained in difficulty.
More stable but yet to end stagnation
As of December 2013, those difficulties had been eased to a certain extent. The economy was showing signs of recovery. Macroeconomic indicators like growth, inflation, exchange rate, import, export and banking liquidity got more stable than previous years. Financial and real estate markets had not revitalised though, they were positively developing. In 2013, GDP expanded 5.4 percent, inflation was controlled and capped at 6.02 percent, and total exports increased 14.4 percent. Especially, foreign direct investment (FDI) attraction retained strong growth. Registered FDI capital totalled US$20.8 billion, up 54 percent over 2012 and nearly US$10 billion of FDI was disbursed in 2013.
Prospects for restored market confidence
Global economic picture forecasts in 2014 and 2015 showed that Vietnamese economy will have both opportunities and challenges, especially agricultural export sector.
As regards policy, in 2014, the Government persisted in applying macroeconomic stabilisation policies and more flexible fiscal and monetary policies to support the market; restore growth; deal with capital difficulties for enterprises, particularly SMEs, agricultural companies and rural companies; boost exports; implement economic restructuring master plan, and speed up the restructuring of three prioritised fields in the 2011-2015 period: public investment, commercial banking, and SOEs.
In 2013, although the Government issued the Resolution 02 dated January 7, 2013 to resolve three issues: Settling inventories, supporting market and investment, supporting enterprises to reduce business costs to facilitate price cut and sale boost, and supporting credit for the real estate market, results remained modest. Hence in 2014, these issues must be carried out more effectively to foster the market confidence and opportunities for companies to revive producing and business activities. A picture of slow economic recovery – but with a more stable macroeconomic environment and better market confidence – is the very expectation in 2014.
D.N
Đăng ký: VietNam News
