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Two scenarios for economic growth in 2009
The economic growth rate may not reach 7% in 2008 and the inflation rate will go down sharply in 2009 are the two main points of the report which has just been released by the Ministry of Planning and Investment (MPI).
MPI has released the report which shows the world economy’s status and forecasts macroeconomic targets for 2009. The report was made after the compilers considered the socio-economic situation as of August.
7% GDP growth rate in 2008 may be unachievable
The National Assembly in June 2008 decided to lower the targeted economic growth rate from 8.5-9% set late last year to the more modest level of 7%. However, the report said, the 7% GDP growth rate is still a difficult goal.
In the optimistic scenario, Vietnam’s industrial production will regain its development from now to the end of the year, while the world economy’s performance will create more favourable conditions for Vietnam’s exports. If so, the GDP economic growth rate will be 6.6-6.8%.
In order to make the scenario happen, inflation has to go down sharply in the last months of the year to stay at 29-30.5% for the whole year.
In the more pessimistic scenario, the GDP growth rate will be 6.2-6.5% only, as industrial production will decrease in the upcoming months due to lack of capital, higher input material prices, electricity shortage and the world’s oil market volatility. Meanwhile, the volume of cash in circulation increases dramatically as a result of the strong inflow of foreign direct investment and overseas remittance, thus putting pressure on inflation. In such disadvantageous conditions, the inflation rates in the upcoming months could reach 1.7-2.2%, pushing the inflation rate for the whole of 2008 to 31.5-33%.
Inflation rate will go down sharply in 2009
MPI’s group of experts gave two scenarios for economic growth in 2009 with different forecast figures, depending on the happenings in the last months of 2008.
In the first scenario, if inflation can be restrained at acceptable levels, the investment capital of society increases, the world’s crude oil price stays at $110-130/barrel, the steel price decreases a little, the national economy will retain stable growth. The indices will be as follows: GDP will increase by 7-7.5%, the inflation rate will increase by 13-15%, while the trade deficit will be curbed at $22.7bil. The total investments of society in 2009 will be higher than in 2008, equivalent to 41.06% of GDP, while the budget deficit will be 5.11% of GDP.
The second scenario gives more cautious forecasts in the event inflation cannot be curbed as successfully as hoped. Meanwhile, production may face difficulties due to the capital shortage and high interest rates. In this case, the government will continue cutting public investments and fighting to reduce the trade deficit.
In these conditions, the GDP growth rate will be 6-6.5% only in 2009, the inflation rate will be between 10% and 12%, while the trade deficit will be less than $20bil. The total investments of society will be at the same level as in 2008, while the budget deficit will be less than 4.8% of GDP.
VNN
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