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VN needs to stabilise macroeconomy and restore confidence: expert
When asked what Vietnam should do in the event of a global economic recession triggered by the US financial crisis, Dr Vo Tri Thanh, Director of the Department for International Integration Studies under the Central Institute of Economic Management (CIEM), said that Vietnam needs to stabilise the macroeconomy and keep confident.
The US economy is now facing a crisis. Could you please tell us about the direct impacts of the US economic recession on Vietnam's macroeconomy?
Being an economic giant, which makes up ¼ GDP and consumes 15% of total import turnover of the world, the crisis of the country will certainly have impacts on the rest of the world, including Vietnam, in terms of trade, investment and finance.
The US is the biggest export market for Vietnam. It consumes 20% of Vietnam's total export turnover. It is also a big investor in Vietnam. If counting US investment through third countries, the US is the biggest foreign investor in Vietnam.
I don't think foreign direct investment (FDI) will bear much influence, but I think the influence will be greater on foreign indirect investment. International financial institutions will have to reconsider their investment strategies and portfolios, which could lead to the adjustment of capital flow into Vietnam. I have to remind you that foreign investors make up 40-50% of transaction value and hold 25-30% of shares in Vietnam's market.
However, there is no need to worry too much that the US financial crisis will have bad impacts on East Asia, including Vietnam. East Asian nations have close relations with the US economy, but the impacts will not be as big as on European countries. East Asian countries may see economic growth slow down, but GDP growth rates will still be higher than in other regions.
Some experts say that Vietnam's macroeconomy has improved, while its microeconomy still shows problems. What is your comment about this?
It is true that problems exist. The inflation rate remains relatively high, expected to reach 26-29% by the end of the year, the highest level in the region. The trade deficit remains big, reaching $16bil so far this year, and is forecast to rise to $20bil by the end of the year. Meanwhile, the confidence of people and investors in economic stability remains slim.
The US economic crisis has shaken the global financial market. What do you think Vietnam should do to minimise the bad impacts of the crisis on Vietnam's money and stock markets?
Before the Lehman Brothers filed for bankruptcy, Merrill Lynch released a decision to sell itself to Bank of America, and AIG called for bailout; pessimistic forecasts about the world's economy were given.
IMF thinks that the global economy will grow by 3.7% in 2008, while OECD and WB give lower figures, at 1.8-2.8% for the world's economy and 1.2-1.5% for the US economy.
Vietnam needs to well prepare to deal with the possible impacts from the US financial crisis. What Vietnam should do first is to try to maintain macroeconomic stability and restore investors and people's confidence. Vietnam also needs to anticipate the worst scenarios in order to have timely reactions when the things occur.
It also needs to think of dealing with social security, difficulties of small- and medium-size enterprises and bad debts of the banking system.
What would you say about the stock market in the last months of the year?
The fluctuations of the stock market prove to be unavoidable. Vietnam needs to get to work on building foundations for the sustainable development of the market (developing the legal framework, standardising the information exposure system). Investors should learn more about how to make investment. They should learn not only how to cut losses, but how to cut profit as well.
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