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Protective measures provide a shield against economic tsunamis
It is important for Vietnam to forecast such impacts and shield itself from the impacts of the US financial crisis by devising proper solutions and policies to support its production and business activities.
The financial crisis in the US has made a certain impact on Vietnam’s monetary and financial market. The remark was made by financial expert Bui Kien Thanh and former governor of the State Bank of Vietnam Cao Si Kiem in a talk with VOVNews reporter.
Exports tend to decrease
The US economy accounts for 30 percent of total turnover capital in the world. In the current context, all nations get involved in the international process, so fluctuations in one economy, especially as big as the US, will have a certain impact on others.
Regarding the impacts of the US financial crisis, Mr Thanh and Mr Kiem affirmed that Vietnam’s exports will be affected immediately.
Vietnam’s exports to the US market have increased rapidly and the US is an important importer of Vietnam’s garments and textiles, footwear, and seafood products. The US ranks sixth among countries investing in Vietnam, but most of US projects operating in Vietnam are in their initial phases and focus on infrastructure investment in the long-term.
However, the crisis impacts on nations in different ways depending on their economic relations with the US. Some regions, which have totally depended on the US, will be affected seriously, said Mr Kiem.
Mr Thank said that not only Vietnam but many Asian countries also have been affected as they will lose one of their biggest export markets due to the US economic recession. When US consumers spend less on buying cars, televisions, fridges and food, many economies which rely mostly on exporting such products will encounter a lot of difficulties.
Fluctuations in the monetary and financial market
Many foreign investors are now operating in Vietnam’s stock market. Mr Thanh said that many of them will have to cut their investment and restructure their financial resources due to the impacts of the US financial market. Retail investors such as banks and financial organizations’ selling a large number of their shares on consecutive days will cause fluctuation in the market, thus the State Security Commission and the Ministry of Finance must prepare measures to support the market. They must provide sufficient and transparent information on State investment activities and business operation and give timely warnings if need be. Mr Thanh added that it is necessary to ease public concerns and stabilise market.
Cao Sy Kiem said that global impact on Vietnam is mainly through capital channel (i.e securities or the investment system) because the US investors will either directly or indirectly withdraw their capital from Vietnam to resolve their own problems when the world economy sinks into recess.
Regarding the Asian Development Bank (ADB)’s warning of improving the risk management of the Vietnamese monetary system, Mr Kiem stated that a high rate of inflation will lead to bad debts, causing risks for the banking system, and the national economy as a whole. The Vietnamese credit and banking system has made limited progress in reducing risks. The quality of credit and sustainability of the securities and real estate market is not high. Therefore, it is necessary to strictly control monetary risks at the moment and in the near future, Mr Kiem added.
Financial expert Bui Kien Thannh said that it is high time for Vietnamese producers to pay more attention to domestic customers. Vietnam has not integrated deeply in the “global game” so impacts may not spread to Vietnam while other economies can be and have already been seriously influenced by these impacts. The clearest example of this is the 1997 Asian economic crisis, which caused only a light impact on the Vietnamese economy. Since this is one of the advantages for investors in Vietnam, the country should use it as a lever to attract more foreign capital, Mr Thanh said.
According to financial and economic experts, the US financial and economic crisis will influence the Vietnamese economy sooner or later. Currently, the most important task is to forecast the level of impact and to have suitable shields in place. The country must devise policies to support production to avoid sudden shocks.
VOV
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