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National economy not likely to bounce back until Q4
Unlike other experts, who are optimistic about the ‘beautiful’ macroeconomic indices in the last few months, Nguyen Dinh Cung, Head of the Macroeconomic Management Department under the Central Institute of Economic Management (CIEM), has expressed his worries about the economy’s performance in the second half of the year.
Cung said that the national economy has not reached its bottom and that it is not likely to see a bounce-back until the fourth quarter of the year or early next year.
The national economy is still growing, but the growth rate has slowed down. The growth rate in Q2 was lower than that of Q1 and the same period of last year, and made GDP of H1 decrease to 6.5%.
The slowdown proves to be opposite previous years, when the national economy grew gradually from Q1 to Q3 and Q4.
Some experts say that the GDP growth rate of 6.5% in H1 is satisfactory in the current difficult period of the national economy. What is your comment about this?
I don’t think so. The figure was partially because of the increased price increases, and also because it ‘inherited’ the high growth from 2007.
Industrial production in July increased by 16.1% only over the same period of last year, while the figure was 18.7% in July 2007 over July 2006.
Last year, the capital market developed well with profuse credit capital, which helped enterprises make investments in production, and the products were still consumed in H1 of 2008.
So I can say that the 6.5% GDP growth rate and 16.1% growth rate in industrial production are the result of the high economic growth in 2007, not due to favourable macroeconomic conditions in 2008.
However, if we look at the retail turnover increase, can we see that the problems are not as serious as you think?
It is true that the total retail turnover of commodities and services in the first seven months of the year increased by 29.8% over the same period of last year (the figure was 23.1% last year).
However, I have to say that the high consumption growth originated from high prices. The prices of food, foodstuffs and petroleum products increased sharply, while the prices of industrial products did not increase so sharply.
Do you think that agriculture has been benefiting from the commodity price increases?
Yes, I do. Despite the insect epidemics, production still saw satisfactory results. The GDP of agriculture, forestry and seafood sectors rose by 3.04% in H1, higher than 2007’s figure at 2.67%.
Let’s talk about investments in production. What would you say about the figure of $45.3bil of foreign direct investment (FDI) committed so far this year?
I’m not optimistic about the figure, and I’m worried about the quality of FDI projects recently. There has been compliant licencing which needs to be reconsidered.
Statistics show that in the seven months, 83% of registered FDI capital went into enterprises using natural resources and discharging pollution (projects in heavy industries like steel or petrochemicals). Besides, there have been too many projects in real estate and projects that need too much energy, or projects that cannot create foreign currencies.
While the committed FDI capital was big, the disbursed capital remained modest. It is estimated that some $40bil had not been disbursed in 1988-2006. The figure would be $90bil if counting the registered capital of $66bil in the last two years. Only $14bil of this amount has been disbursed.
How about the investments from other sectors?
The investment from the state-owned sector has not seen any decrease. And I have really been surprised by the growth in the investments from the private sector. In the first half of the year, the investment from the sector increased by 18.8% over the same period of the last year. I have learned that a lot of enterprises have to mobilise capital from different sources, some of them have sold private-owned assets to get money for investments.
The increase of the private sector’s investments should be seen as the driving force for the domestic production. However, I’m worried that businesses still cannot anticipate all the difficulties they will have to face.
The investments in this period will serve as the impetus for development, but will be a burden on businesses if the national economy cannot recover soon.
You have mentioned difficulties. What are the risks for domestic production?
The biggest risk for businesses is that they cannot anticipate the upcoming difficulties.
The favourable conditions will change in the coming years, when the contracts on soft loans mature. The latest petrol price hike will not show its effects for some more months.
As the inflation rate is high, the incomes of people will decrease, thus affecting the purchasing power. This means that it will be more difficult to sell commodities, and the low point of the national economy’s recession will appear, I think, in Q4 or early next year.
VNN
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