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Extend stimulus to secure economic recovery, experts advise
Further fiscal stimulus is needed as the US$8 billion package this year has worked its way through the economy, showing good results, experts say.
If the economy is not completely out of the woods by the end of the current stimulus package, its continuation should be considered though the amount can be smaller, economist Vu Dinh Anh said Friday in a report on Vietnam Television’s website
Cao Sy Kiem, a member of the National Advisory Council for Monetary Policy, said more stimulus measures would be necessary even after the economy has recovered.
“Local businesses need to descend the ladder step by step and there should not be any abrupt end in stimulus spending,” Kiem said in an interview with Tien Phong newspaper Wednesday.
Although the government’s program to subsidize 4 percent of the interest rate on loans taken by local businesses has shown real effects, it can only meet about one third of the credit demand, he said, noting the program is also set to close in the next four months.
Vietnam’s economy accelerated in the second quarter as the stimulus helped drive credit growth and buoyed construction activity.
The nation’s commercial banks have lent more than VND397.7 trillion ($22.3 billion) to businesses as part of the government’s loan-subsidy program as of August 27, a 0.43 percent increase from a week earlier, according to a central bank report Friday.
“The government’s interest-rate subsidy program has helped the banking system and companies avoid bad debt and bankruptcies,” Tran Du Lich, a member of Vietnam’s National Assembly Committee for Economic Affairs, said at a conference in Ho Chi Minh City on August 19.
Lich said the National Assembly will early next year discuss the size of another lending program for medium and long-term loans to help companies restructure businesses through the end of next year.
The International Monetary Fund has said the global economy is recovering from a severe downturn, but it is too soon for governments to begin winding down stimulus efforts, according to AFP.
“The outlook is improving but we do feel that it is very important to stress that it is no time for complacency,” AFP quoted IMF spokeswoman Caroline Atkinson as saying at a news conference Thursday.
Kiem said interest rates on loans subsidized by the government are around 6 percent now but they would return to around 10 percent without the subsidies, which would cause many difficulties for local businesses.
“What the government should do is to provide more credit,” he said, noting a credit growth target of around 30 percent is viable.
The central bank plans to ease limits on credit growth this year as it aims to help the nation reach its economic expansion target of about 5 percent.
The State Bank of Vietnam aims to cap expansion in lending at 30 percent, and will try to slow loan growth in the coming years, Governor Nguyen Van Giau said in a statement on the central bank’s website Friday.
Credit from banks has grown 25 percent in the eight months through August from the end of last year, Giau said at a meeting in Da Lat on Friday. Vietnam’s economy may grow 5.2 percent this year, he said.
Thanh Nien, Bloomberg
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