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Q1 2009 the bottom of recession already: Expert
Former Governor of the State Bank of Vietnam, now Chairman of the National Finance Supervision Committee Le Duc Thuy, when talking with the press yesterday morning after the Government announced the second economy stimulus package, proved to be more optimistic than he was one month ago.
Before the Government decided to give an interest rate subsidy to medium- and long-term loans, as well to develop business and production activities, the National Finance Supervision Committee suggested supporting all the loans for business development from now until the end of 2010. Thuy also predicted that Vietnam’s economy would not have a growth rate of more than 5%.
What is your comment about the second economy stimulus which has just been announced by the Government?
While the first demand stimulus package has been applied to businesses, which borrow short-term loans for working capital, the second package focuses more on institutions and individuals who are making new investments to develop business. The term of the preferential loans will also be longer, two years. If we want to stimulate the national economy, we need to stimulate investments, or we will not achieve the desired effects.
When will do you think the stimulus package will bring about effects?
The stimulus packages have already brought effects. Let’s see the economic performance in the first quarter of the year. In January, the situation was very bad, when export and foreign direct investment both decreased, and industrial production had a low growth rate.
However, the situation became better in February and March. The industrial production value in February saw satisfactory improvement, while the domestic consumption became more bustling. The number of employees who lost jobs did not increase. The economic performance improvement will be seen more clearly in the second quarter of the year.
Some experts recently predicted that Vietnam will escape from crisis by the end of the year. What is your viewpoint about that?
In fact, Vietnam has not fallen into crisis; it has only suffered the economic declines. I think that Q1 is the bottom of the recession already, while the national economy will take off afterwards. The Government has adjusted the targeted economic growth rate for the whole year 2009 at 5%. Meanwhile, the GDP growth rate in Q1 was 3.1%, and the figures will not be lower in the next quarters.
At the end of February, when answering questions of the local press, you seemed to be very cautious when predicting the economic performance for the next months of the year. However, you seem to have become more optimistic about the economy. What has made you more optimistic?
The world has been witnessing positive changes. The pessimistic predictions like ‘the worst ever crisis in the last many decades,’ or ‘the crisis has not seen the bottom line’ have disappeared. Even the US administration has expressed higher optimism about the US and global economy.
The signs of recovery can be seen most clearly in the US, while they are seen less clearly in EU and other countries, but the positive signs will have impacts on the rest of the world. China has also shown efforts to recover its economy this year.
Responding to the positive signs, Vietnam’s stock market has also prospered in the last trading sessions.
However, some analysts comment that the domestic stock market has increased because investors anticipate the Government’s second stimulus package, not because they are confident in the long-term recovery?
Maybe the information about the second stimulus package has helped the stock market prosper. However, the investors’ confidence on the stock market also comes from information and active forecasts provided by the Government, as well as foreign and domestic experts.
The Economist recently published an analysis which said that Vietnam is too optimistic about the economic performance. It predicted that Vietnam would get the 0.3% economic growth rate this year. What would you say about that?
It is true that we were once too optimistic, when we set the target of obtaining the GDP growth at the same rate with the previous year. In the latest report, we suggested the 6.2% growth rate target. However, the Government has found out that the high target is unfeasible and it has adjusted the target. Not only Vietnam, all countries in the world have to keep information updated and adjust targets. The World Bank, ADB and IMF are also doing this.
However, The Economist’s report proves to be too pessimistic about Vietnam’s economy. They only consider outside impacts, including export and foreign direct investment decreases, while not considering the inner factors of the national economy. Agriculture, for example, which makes up 20% of Vietnam’s GDP, can make a contribution of 0.5-0.6% to the general growth rate
The recent predictions by Standard Chartered or World Bank and IMF and ADB said Vietnam’s growth rates would be between 4.5-5.5%.
vietnamnet, vne
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