How long ‘financial typhoon’ to stay in Vietnam?
The financial typhoon which broke out in September 2008 has been spreading out to many countries around the world. It is clear that it landed in Vietnam later than in other countries, but it is unclear if it will stay for a long time in Vietnam or will escape soon.
Tran Xuan Gia, the former Minister of Planning and Investment, the former Head of the Prime Ministerial Research Team, and is now Chairman of the Board of Directors of the Asia Commercial Bank (ACB), believes that the typhoon will stay for a long time and bring heavy devastation.
However, some foreign institutions and experts believe that while Vietnam faces this financial burden late, it will escape the soonest.
Both Gia and the institutions have their own reasons to believe in their viewpoints.
Gia said that he could draw some experience from the regional financial crisis a decade ago, adding that the story at this moment is similar to the situation of 1997-1999. Meanwhile, foreign institutions said that Vietnam has well prepared for dealing with the financial problems in advance.
The economic figures of the two periods, 1997-1998 and 2008, are as follows:
The GDP growth rates were 8.15% in 1997, and then 5.76% in 1998 (the initial target was 9% and then was lowered to 5-6%). The rate was just 4.77% though the initial target was 6%.
The GDP growth rate was 8.48% in 2007. The estimated figure for 2008 is 6.5-7% while the initial target was 7.5-8% and then 7%. The targeted GDP growth rate for 2009 is 6.5%.
The CPI increase in 1998 was 9.2%, while the figure was 0.1% in 1999 and is estimated at 21% in 2008. The expected figure for 2009 is less than 15%.
The total retail commodity and service turnover increase was 6.4% in 1998, while the figure was 3.7% in 1999, and is estimated at 6% for 2008.
The export turnover increased by 26.6% in 1997, by 1.9% in 1998, and by 30% in 2008 while it is expected to rise by 13% in 2009. The import turnover increased by 4% in 1997, decreased by 0.8% in 1998, then rose by 2.1% in 1999. The figure is estimated to increase by 39.6% in 2008, but will see the lower increase in 2009.
The registered foreign direct investment (FDI) in 1997 reached almost US $5.6 billion which then decreased to US $5.1 billion in 1998 and just over US $2.5 billion in 1999. The implemented capital in 1997 was over US $3.1 billion and then decreased to under US $2.4 billion in 1998 and US $2.3 billion in 1999. The figures of 2008 are US $61 billion and US $11 billion respectively. The registered FDI capital is expected to be US $30 billion in 2009.
Analysts said that in principle, the impacts of the global crisis on Vietnam will be very big as Vietnam’s economy is export-oriented and has been relying on investments.
The ratio of imports and exports on Vietnam’s GDP in 2007 was as high as 156.2%, and the figure is expected to be even higher in 2008. Vietnam’s ratio is the 5th highest in the world, after Singapore, Hong Kong, Malaysia, and Belgium. The economic growth has been heavily depending by 60% on investment capital. The domestic market has been narrowed as consumers have been tightening their belt.
However, the analysts said that the level of impacts of the financial typhoon on Vietnam’s economy will also depend on the Government’s actions to deal with the crisis.
TBKTVN
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