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Contraction, growth top talks at Economist meet
The impact of the global economic contraction and the Vietnamese Government's response will be a major theme of the Economist magazine's second round-table business conference in Ha Noi today.
So too will be the country's long-term future.
More than 300 Vietnamese and international business representatives are expected to hear Deputy Prime Minister Nguyen Sinh Hung, who will lead key ministers, deliver the conference's keynote speech.
Viet Nam's changing role in the global economy; its path to prosperity; technology transfer and the defeat of corruption are expected to be the focus of the deputy prime minister's address.
Economist Intelligence Unit editorial director Charles Goddard and its Corporate network director and Southeast Asia specialist Justin Wood, who will co-chair the conference, delivered their prognosis at a media conference yesterday.
Viet Nam's 20 years of doi moi had created strong and accelerating economic growth driven by its continuing industrialisation and growing integration into the global economy, said Wood.
"No path to industrialisation and development is without its twists and turns, however, and Viet Nam experienced many during 2008 as growth reached "unsustainable levels," said Goodard.
"Inflation hit 30 per cent during the year, a widening current account deficit put strong downward pressure on the currency, and constraints such as lack of infrastructure and weak regulations all took their toll," he said.
Foreign direct investment rose substantially as foreign investors were encouraged by Viet Nam's continued commitment to reform and open its economy.
The young, expanding and increasingly tech-savvy workforce, whose wages were significantly below those of many neighbouring countries, presented both a compelling production base for new factories and exciting market of future consumers.
Warning
But the duo warn that if the challenges of 2008 were tough, those of 2009 will be even tougher for the Government and Viet Nam will not escape the global economic contraction unscathed.
"Demand for Viet Nam's exports will be hit sharply by the downturn, and tourism will suffer," said Wood.
"Banks will face liquidity constraints and be more cautious in the current environment, hurting the supply of credit to the economy.
"Inward remittances from overseas Vietnamese will be hit, as will FDI, which will fall by around 70 per cent in 2009. Property markets in major cities of Viet Nam have already fallen hard and the number of unemployed will almost double from 4.7 per cent last year to 8.2 per cent this year.
"Putting all of this together, the Economist Intelligence Unit expects Viet Nam's GDP to grow by just 0.3 per cent this year, down from around 6.2 per cent in 2008."
Wood said the Government had not only to navigate the economic downturn, it also had to maintain social harmony and not lose sight of the long-term challenges.
These were the upgrading of infrastructure, eliminating corruption and improving the policies and institutions that oversee the country's economy and financial system.
Education was also be critical if Viet Nam was to achieve its aim of becoming an industrialised nation by 2020.
HSBC Viet Nam chief executive office Thomas Tobin said the Vietnamese Government's measures to deal with the failing world economy were taking effect.
"We applaud the Government' strong stance on addressing inflation, the biggest economic concern in 2008, while at the same time managing to recover the growth rate," he said.
The banker said he expected inflation to fall below 4 per cent by mid 2009, and then gradually rise to a long-term average of 11 per cent by the end of 2010, consistent with gradually improving growth.
The banking industry was pleased the Government had continued with its WTO commitments, he said.
This included opening the banking industry to international competition.
VietNamNet, Viet Nam News
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