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National economy back on track
The national economy has been gradually recovering over the last six months of this year, achieving a GDP growth rate of 6.5 percent despite the impact of the global economic slowdown, according to the General Statistics Office (GSO).
The GSO cites statistics showing that the agro-forestry and fishery sector grew by 3.4 percent, the industrial and construction sectors by 7 percent and the service sector by 7.6 percent.
Bui Ba Cuong, an official from the Ministry of Planning and Investment, says that more effort should be made to promote the agro-forestry, fisheries and service sectors in the remaining six months in the hope of reaching the 7-percent GDP target set for this year.
Following the prolonged cold spell earlier this year, very few experts thought that the country’s rice exports would reach as much as 4.5 million tonnes this year. However, the target could be achievable after the country had a bumper winter-spring crop and since the Government decided to increase the rice export volume.
For the first time, the State Bank of Vietnam (SBV) announced its foreign currency reserves stand at US$20.7 billion, to stabilise the market. According to the SBV, with these reserves, the Government is able to intervene in the foreign currency market and balance the trade deficit when necessary.
SBV Governor Nguyen Van Giau says that as from July 1 the central bank will keep the basic interest rate of 14 percent for transactions using the domestic currency (VND). It will also promote the liquidity of commercial banks to help them timely adjust credit mechanisms when needed to meet the increasing demand for loans by every economic sector.
According to the commercial banks, the exchange rate between the VND and the US dollar (US$) has been dropping closer to the inter-bank rate announced by the SBV. However, the exchange rate remains high on the black market, with US$1 being exchanged for VND17,500.
The stock market has also bounced back recently, seeing the VN-Index increase in 11 consecutive trading sessions to stand at 410 points on July 2. The recovery of the stock market has restored foreign investors’ trust in the market and the national economy in general. The good news is expected to pave the way for the Government to mobilise all its resources to curb inflation and stabilise the macro economy.
The consumer price index (CPI) has begun to fall from 3.95 percent in May to 2.14 percent in June. The fall is testimony to the Government’s effective remedies to combat the galloping inflation rate. In addition, the Government has instructed all ministries and relevant sectors to stabilise the prices of power, clean water and public transport services until the end of the year. It has drafted a number of scenarios in case global oil prices keep rising and affirmed that it will ensure an adequate supply of petrol and oil no matter what happens.
With these strong measures being put in place, the Ministry of Industry and Trade has forecast that the CPI would continue to fall in the coming months.
There has been growing concern about Vietnam’s high trade deficit, standing at US$14.8 billion in the first half of this year. The SBV explains that the balance of payments in the past six months is acceptable. If Vietnam maintains a trade deficit of US$20 billion the whole year, it will still achieve a favourable trade balance of US$2.5 billion. In fact, the country’s imports are falling while its exports are increasing sharply.
A recent survey conducted by several international financial institutions, shows that foreign indirect investment has constantly flowed into Vietnam despite difficulties in the national economy. In the first quarter of this year, overseas remittances hit US$2.6 billion, a year-on-year increase of 45 percent. Meanwhile, foreign debts remain at safe levels. This means that the domestic currency (VND) is comparatively stable against other foreign currencies.
In the past six months, Vietnam’s foreign direct investment hit a record high of US$31.6 billion compared to US$21.3 billion recorded in the whole of 2007. Approximately US$5 billion was also disbursed in the reviewed period – a record figure so far.
The Government has worked out the major tasks for the remaining months of the year, with a focus on curbing inflation, cutting public spending, accelerating the disbursement of official development assistance, boosting industrial production, reducing imports and boosting exports. A lot of effort will be made to stabilise the financial and monetary markets and revamp the stock market.
VNN
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