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World financial turmoil to hit Vietnam exports, FDI: experts
The global financial crisis has had a strong impact on the Vietnamese economy, with exports declining and foreign investments expected to slow, experts said at a conference in Ho Chi Minh City Tuesday.
Speaking at the meeting held to discuss the effects of the global financial crisis on the country, Truong Dinh Tuyen, a member of the National Currency Policy Council, said it has hurt exports.
The demand for many Vietnamese products has decreased in major markets like the US and EU and the credit crunch also made it difficult for importers in these markets to buy from other countries, he said.
“The crisis hasn’t reached the extent of making Americans unable to afford coffee every day,” he said. “But because businesses there can’t apply for loans to import coffee, Vietnam’s coffee industry is affected.”
The global slowdown is also expected to suppress demand for rubber in the auto industries in many countries, affecting export of Vietnamese rubber.
Tuyen said the impact of the global financial crisis on Vietnam’s economy could be felt this month. The country’s export revenue in October is estimated to be around US$5.1 billion, dropping from the average of $5.4 billion this year. Export revenues often surge at the end of the year.
He said the most important task for local businesses is to cut prices so that their products are competitive.
Vu Thanh Tu Anh, director of the Fulbright Economics Teaching Program, said the foreign direct investment (FDI) inflows into Vietnam would be hit by the crisis.
Difficulties in obtaining loans would slow down many FDI projects and even put an end to some, he said.
Vietnam has already received FDI commitments of around $60 billion this year, and full-year disbursements are expected to be $12 billion.
Le Xuan Nghia, director of the central bank’s Banking Development Strategy Department, told the conference it is time to loosen monetary policies.
If businesses cannot have access to bank loans, the economy would go down more rapidly, he said.
Le Duc Thuy, chairman of the National Financial Supervisory Commission, said Vietnam should let banks negotiate interest rates with their clients.
“Banks with strong liquidity can decide what deposit rates they can offer and which interest rates and how much money they can lend, depending on the client’s credibility.”
He said the central bank should also remove the cap it has set on credit expansion of 30 percent to ensure funds for sectors that need money for growth.
Tuyen said, “Production has stagnated since many companies can’t borrow money because of high interest rates.”
The State Bank of Vietnam cut the key rate to 13 percent from 14 percent last week to ease a cash shortage that is affecting production. Vietnam’s benchmark rates are still the highest in Asia, along with Pakistan’s, as the government tries to slow inflation.
“Vietnam may not be able to reach economic growth of 6.5 percent this year and a forecast of 6 percent next year is not too pessimistic,” Thuy said.
The economy grew 8.5 percent last year, the fastest pace in more than a decade.
Thanh Nien
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