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Vietnam’s economy in 2009: how to fly in bad weather?
“Bad and very bad” are the words experts are using to describe the picture of the world’s economy in 2009. Local businesses say that in such conditions, it would be better ‘to do nothing’. Meanwhile, economists still believe that Vietnamese businesses can survive the difficulties and develop.
Flying in the bad weather
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Three scenarios of Vietnam’s economy in 2009
Optimistic scenario: GDP growth rate 6.5%, inflation rate less than 10%, the national economy will recover in 2010
Medium scenario: GDP growth rate 5.5%, inflation rate 6-8%, the national economy will recover from 2011
Bad scenario: GDP growth rate 4.5%, inflation rate over 10%, the national economy stagnates |
Associate Prof Dr Vo Dai Luoc, former Head of the Institute for World Economics and Political Studies, believes that the world’s economic situation in 2009 will be worse than ever before.
Luoc said that the most worrying thing is that the bottom of the crisis has not been seen yet, and it remains unclear how gloomy the world’s economic picture will be.
A recent article on FEER wrote that Vietnam has suffered the most negative impacts from the crisis among Asian countries as Vietnam relies on exports, while its big partners, including the US, Japan, EU and Australia, are facing their own big problems.
In such a context, a lot of businesses say that it would be better to do nothing at the moment.
Dr Dinh Van An from the Central Institute for Economic Management, compared Vietnam’s economy to a diseased body that’s plagued in addition by inclement weather.
“The shocks in the world’s market have been magnified in Vietnam,” An said, adding that the problems of Vietnam are bigger than other countries, though everyone is experiencing the same ‘storm’.
Warnings about the quality of the national economy
While emphasising the poor condition of the world’s economy, An said that the main problem of Vietnam’s economy is internal uncertainty.
According to Dr Tran Du Lich, a senior economist, Vietnam’s economy has been growing rapidly in quantity, but the quality of the growth has been decreasing. The average ICOR in the seven years from 2001 to 2008 is nearly 5.
The ratio of investment on GDP is 38% while the economic growth rate is just 7.6%. One dong of expense can only bring 1.28 dong in GDP in agriculture, while one dong of expense can only bring 0.51 dong in GDP in industry.
Regarding macroeconomic management, the government has found out the true diseases of the national economy and prescribed medicine for the diseases. However, every prescription has side effects. Experts are predicting that deflation may last until the second and third quarters of 2009, but that inflation may recur by the end of the year as a result of the demand stimulus package.
“The factors that cause high inflation still exist and can cause inflation at any time,” said Lich.
Sharing the same view as Lich, An also said that it is necessary to be wary about high inflation as the causes of high inflation have still not been rooted out.
The time for restructuring
In the context of the gloomy picture of the national economy, experts still can see opportunities. Tran Dinh Thien, a senior economist, said that it is now the right time to restructure the national economy, comparing the restructuring with the snake shedding his skin. It is painful, but it is very necessary for long-term sustainable development.
However, experts can see opportunities even in crisis. “Vietnam can provide nearly a half of the top 50 product items which have become the best-sellers in the US. The crisis has prompted US people to focus on low- and medium-cost products. Products priced at less than $250 are selling well, and this is an opportunity for Vietnam to boost exports to the US,” an expert said.
Lich said that generally speaking, Vietnamese people and businesses are optimistic and flexible when they meet difficulties, which should be seen as a great advantage of Vietnamese businesses.
“I have seen with my own eyes a lot of businesses rescue themselves before the state saves them. I believe that they will survive the uncertainties, and the national economy will recover in 2010,” An said.
Phan Hung
vietnamnet
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