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Vietnam’s economy not so bad off: Vietnamese experts
Though deferring to the reports released by international institutions, Vietnamese economists don’t think that the situation is as bad as represented in the reports.
Why shouldn’t we be too pessimistic?
The reports gave pessimistic viewpoints after considering the high inflation rate in Vietnam (16% in the first five months of the year). Meanwhile, the monetary policies initiated by the government have not helped restrain inflation, and the big trade deficit has led the VND to devaluate by 30-40%. The real estate market shows signs of falling into crisis due to continued sharp falls since the beginning of the year, which in turn threatens the banking system.
However, Nguyen Ho Nam, General Director of Sacombank’s Securities Company, said that most of the report makers are not present in Vietnam, their offices are located in Hong Kong or Singapore. They collected figures and documents from different sources, interviewed different people to make reports. Therefore, Nam thinks that the reliability of the reports is not high.
It is undeniable that high inflation has been badly affecting the socio-economic situation, especially the income of Vietnamese people.
However, it is clear that the high inflation rate in May was caused by the unexpected rice price increase, which originated with a rumour.
Associate Prof Dr Tran Hoang Ngan, Dean of the Banking Faculty under the HCM City Economics University, and member of the National Advisory Council for Finance and Monetary Policies, said that as Vietnam is a big rice exporter it will never lack rice. In June, when the rice price stabilises, the inflation rate will go down.
Regarding the devaluation of the VND, mentioned in the reports, Nam said that the viewpoint in the reports is illogical. Statistics show that nearly 30% of the imports were equipment and machines, which means that the imports will create income in the future.
It is true that Vietnam is suffering a current trade balance deficit ($20-25bil), but it has a surplus in payment balance thanks to long-term capital sources from FDI and ODA.
Sharing the same view, Ngan said that foreign capital is inflowing into Vietnam from the rest of the world as the US$ interest rates in Vietnam prove to be very attractive, at 7-8%, while the rates are now 4-5% in other countries.
Keep calm, investors
Ngan and Nam have confirmed that foreign investment funds and institutions have sold shares in the last time. However, they said that this was simply the behaviour of cutting losses.
The sale of several hundred million dollars proves to be chicken feed if compared to the total capital of $6bil they have brought into Vietnam. In fact, statistics show that foreign investors are still purchasing more than selling.
However, Ngan said that the stock market will not recover if the deposit interest rates stay firmly at high levels.
“We have asked the State Bank of Vietnam to lower the compulsory reserve ratio from 11% currently to 8% in order to improve the liquidity,” Ngan said.
In the medium and long term, Vietnam’s economy will be pushed by the balance between inflation and growth rate. The monetary policies, expected to become stable in early 2009, and heavy investment in infrastructure will serve as important factors that help maintain high GDP growth rate in coming years. Vietnam’s GDP will regain high growth rates of 7.5-8% in 2009 and 2010.
VNN
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