Vietnam Economy Still Stumbling (11/5)
11/05/2011 - 13 Lượt xem
However, Vietnam is inheriting the comparative advantages of export processing industries and the tropical agriculture located in the Lower Mekong River region. While the world economy is recovering slowly and coping with the risk of falling into another crisis, the Vietnamese economy is faced by both favorable conditions and difficulties.
Awakening internal strength
Despite a decline of investment sources and increasing inflation, industrial, agricultural, forest and aquatic production and exports continue to grow.
In the first four months of 2011, the production value of the entire industrial sector (calculated based on comparative prices of 1994) increased 14.2 percent compared with the same period in 2010; the production value of the agricultural, forest and fishery sectors grew 3.5 percent.
Export value was estimated to reach nearly US$27 billion, up 35.7 percent (by more than US$7 billion) compared with the first four months of 2010. The Vietnamese economy is showing its internal strength. This is reflected in the 40-percent increase in the export value of the domestic economic sector in the first four months of 2011 year on year, while the export value of the foreign invested sector (including crude oil businesses) grew only 28 percent. Notably, the export value of agricultural, forest and aquatic products reached about US$8 billion, up 43.3 percent. In the first four months of 2011, Vietnam exported nearly US$2 million tonnes of rice - the highest volume since 1989.
The increased export value is attributed to higher export volumes and higher export prices of many kinds of products, especially agricultural and aquatic products. Statisticians said that even if export prices did not increase, the export value of the first four months of 2011 would grow more than 20 percent compared with the same period in 2010. Officials from the Ministry of Industry and Trade and the General Statistical Office estimated that price rises on the world market had seen export values increase by about US$2.1 billion, while requiring Vietnam to spend an additional US$2.4 billion on imports in comparison with the first four months of 2010. Therefore, it can be concluded that export value in the first four months of 2011 increased thanks mostly to higher volumes.
In the first four months of 2010 compared with the same time of 2009, the export value of the domestic economic sector decreased by 25 percent while that of the foreign invested sector grew more than 28 percent. In the first four months of 2011, the domestic economic sector moved ahead of the foreign invested sector. The competitiveness of domestic companies is improving. In the first four months of 2011, the industrial production value of non-State companies (calculated based on comparative prices of 1994) was 16.6 percent higher than in the same time of 2010 while the industrial production value of foreign invested companies increased by 16.3 percent.
In the first four months of 2011, the weather condition was favorable for the tourism sector to develop. About two million foreign tourists came to Vietnam, an increase of 12 percent compared with the first four months of 2010. Despite a high inflation rate, domestic trade showed good results with total retail sales of goods and revenue from consumer services growing more than 22 percent. This reflects the important role of the domestic market for the development of the Vietnamese economy. In the first four months of 2011, the service sector took the lead by achieving a growth rate of 6.4 percent compared with the same time of 2010 while the industry and construction sector grew 5.5 percent. Currently, the service sector makes up 45 percent of Vietnam's GDP (Gross Domestic Product). The Vietnamese economy is being restructured in a positive direction but still slowly.
Galloping inflation: the number-one enemy
Apart from the above encouraging results, in the first four months of 2011, the Vietnamese economy showed some signs of instability at the macroscopic level, which led to galloping inflation.
Galloping inflation must be considered as the number-one enemy and curbing inflation as the most important task of ministries, sectors, localities and the entire Vietnamese business community from now to the end of the year.
Escalating prices of goods, especially food, petrol, oil and construction materials, have caused numerous difficulties facing producers, traders and investors as well as low-income workers. Reality shows that in the past more than 20 years, the families of low-income workers had never experienced such a hard life as it is today.
In the first four months of 2011, the consumer price index (CPI) increased 9.64 percent. It is predicted that the inflation rate of the whole year cannot be curbed at a single digit. Many experts forecasted that the inflation rate of 2011 will possibly be 20 percent, almost as high as it was in 2008 (22.97 percent), if efforts to restrain inflation in the remaining eight months fail.
The inflation situation in Vietnam have been affected considerably by rises in the price of food, production materials and fuels on the world market due to the political crisis in the Middle East and North Africa and the public debt crisis in some European countries. It is predicted that the heavy consequences of the recent earthquake and tsunami in Japan will also have an impact on the inflation rate in Vietnam.
However, the high inflation rate in Vietnam cannot be blamed totally on external factors. In fact, public expenditure in Vietnam has not been tightened yet and for the past several decades, the State budgetary overspending was allowed to be at the rate of more than five percent of the country's GDP. Moreover, the use of credit loans for non-production and overseas investment purposes has not been effectively managed. State-owned companies are allowed to invest in a wide range of fields beyond their administrative functions. The effectiveness of public investment as well as the investment projects of State-owned companies remains low.
Under Governmental Resolution 11, some monetary tightening measures are being taken to improve credit, foreign currency and foreign exchange management. Those measures have shown good initial results which are expected to help stabilize prices as well as financial and monetary activities. If the banking system operates more effectively to better serve production activities, especially in the agricultural, forest and aquatic sectors, the Vietnamese economy will possibly be able to escape galloping inflation, avoid another decline and move towards sustainable growth in the years to come in accordance with the Politburo's 2011 Conclusion on Socioeconomic Performance.
It is necessary to further reduce public investment and practice thrift from the central level to the local level, temporarily stop overseas investment, invest less in non-production fields and at the same time intensify investment in production, especially all segments of the agricultural, forest and fishery sectors. These are considered as the most important and effective provisional solutions which can take the Vietnamese economy out of galloping inflation and ensure social security, thus encouraging people to work with enthusiasm and bring into play their creativity./.
Source: VEN
