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Relative calm during the storm
While much of the world is in turmoil over the current economic and financial environment, there’s a relative calm over Vietnam.
Although it might be naïve to assume Vietnam is immune to the woes of the global economy and financial sector, some experts are presenting a rather buoyant and optimistic outlook for Vietnam and Asia in 2009 and beyond.
Growth in Southeast Asian economies has slowed dramatically as the global economy withers, but the region is by no means experiencing what the US, Europe and Japan are. The Asian Development Bank forecasts Vietnam’s GDP growth at 5 percent; the World Bank forecast is higher, at 6.5 percent – significantly lower than previous growth of around 8 percent.
Ayumi Konishi, Vietnam Country Director of Asian Development Bank (ADB) believes the situation in Asia right now is relatively good. Speaking at a luncheon hosted by Eurocham on Thursday, Konishi said that the impact of the global financial crisis is likely to be deeper and longer than expected. But he expressed some positive prospects for Vietnam and Asia in general.
The ADB expects good growth in the short-to-medium term for Asia, with the region and the economies fundamentally sound. Konishi said he doubts that there will be a repeat of the Asian financial crisis of 1997.
The global financial crisis, which started in the G3 countries in the financial sector and moved to the real economy, has now impacted businesses and bottom-lines somewhat indiscriminately, and affected both blue collar workers and executives. Konishi said that with any impact in Asia, we’re likely to see the reverse trend, with the real economy being hit first – businesses and banks’ balance sheets are likely to be hurt – followed by a weakening of the corporate and then the financial sector.
These comments come off the back of three economic agreements signed
by Southeast Asian nations on Tuesday, aimed to encourage investment and reduce tariffs. The trade agreements by the Association of Southeast Asian Nations (ASEAN) were ratified after the enactment of a new charter in Jakarta on Monday, setting free trade and political liberalization standards for the 10 members.
The Vietnamese government this week announced it would expand a proposed US$1 billion economic stimulus package to $6 billion, in part through increasing tax breaks for importers, manufacturers and consumers. The details of that package are yet to be announced.
Konishi, who recently attended the Consultative Group Meeting in Hanoi, indicated the direct impact of the global financial crisis on Vietnam would be small. He said Vietnam’s financial sector would feel little impact since the big financial institutions that are in trouble have little investment here.
According to Vietnam’s General Statistics office and ADB’s calculations, Vietnam’s exports and imports have declined from July 2008 onwards. The country’s stock market has performed poorly and was one of the worst in Asia this year, with the benchmark index tumbling by about 67 percent. The Ho Chi Minh Stock Exchange has seen dramatic fluctuations this year, and it’s now back to its 2006 level of about 300.
“As long as it stays at 300 level... I don’t think we should be too worried,” Konishi said.
There will be indirect impacts on Vietnam as well. The ADB predicts Vietnam will see slower exports, further decreases in tourist arrivals, weaker foreign direct investment (FDI) and declining remittances and labor exports.
International Market Assessment (IMA) Asia’s latest Asia Pacific Executive Brief for December 2008 states that industrial production has slowed down to 5.6 percent year-onyear in November compared to a peak of 35.7 percent year-on-year in March.
As the global economy slows down, many companies which have production based in Asia, will start to close down some manufacturing plants, but also open up others, said Konishi.
“The question is will Vietnam be attractive enough? It will depend on how Vietnam can improve the business climate,” he said.
And on Friday, grim news from the President of the World Bank, warning of a worldwide struggle in the first half of 2009.
“I am afraid that the first six months of 2009 are going to be problematic worldwide, including Asia and Southeast Asia,” Robert Zoellick told journalists during a visit to Singapore.
“Governments’ monetary and fiscal policy, as well as open trade systems, will determine whether the situation can improve later next year,” he said.
But the Vietnamese people remain positive during these uncertain times. A recent survey by The Nielsen Company shows consumer confidence in Vietnam is still relatively high, ranked 9th worldwide, although it has been declining over the past year. The Global Consumer Confidence Survey carried out in the midst of the crisis in October, found 45 percent of Vietnamese expect the recession to end within 12 months.
Asha Phillips
Thanh nien
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