series of reports were released by international financial institutions in May which reflected worries about the securities market, monetary policies, inflation and growth rate in Vietnam.

Standard & Poor’s has lowered Vietnam’s credit rating from stable to negative, showing that there are doubts in the global community about the country’s capacity to cool down its overheated economy.

Daiwa Institute of Research (DIR) has also released a pessimistic report about Vietnam, advising investors not to make investment in Vietnam. DIR thinks that the current interest rate is not high enough in the current conditions, and suggested raising the rate to 20-25% in order to ensure positive real interest rates for depositors.

However, a lot of experts do not share the same viewpoint.

Hisatsugu Furukawa, a monetary policy expert with the Japan International Cooperation Agency, (JICA) is one of them.

The biggest problem now for the government of Vietnam is the high inflation rate, which explains why it has been trying to tighten the monetary policies. Banks have been asked to keep cautious with their loans and pay more attention to the quality of loans, while businesses have been requested to check their investment projects.

The tightened monetary policies have shown effectiveness. Food and foodstuff prices have been decreasing since reaching their highest peaks, while real estate prices have also been decreasing, and the VND is appreciating a bit.

Regarding the positive real interest rate policy, Mr Furukawa said that in many countries, in some periods, interest rates are a little lower than inflation rates in order to encourage businesses to make long-term investments.

The thing that Vietnamese agencies need to do now is to check the impacts of the policies in order to make suitable adjustments after considering the market’s performance.

Regarding the trade deficit, Mr Furukawa said that the trade deficit has been increasing rapidly in the last few years, but it is still receiving foreign investments, which reflects the optimism of foreign investors regarding Vietnam’s economy.

The expert says that Vietnam can obtain high economic growth thanks to increased savings, balanced international payments thanks to foreign direct investment, capital from the official development assistance ODA and overseas remittance. The state budget deficit proves to be within control, while Vietnam has a young and dynamic labour force. “I am optimistic about Vietnam’s economy,” he said, adding that investors should have a long-term vision instead of just looking at the immediate time.

Source: TBKTVN