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Signs of economic recovery remain a muddle
Government economic management should remain cautious until the signs of economic recovery are clearer, a senior economist recommends, and analysts should agree on what data are meaningful.
The noted economist, Dr. Le Dang Doanh, recently discussed the economic outlook with staff of Thoi bao Kinh te Vietnam. Below are excerpts from the conversation.
The economic indicators are now better than at the beginning of the year. But this should be seen as a normal thing. It was understandable why the GDP growth rate was 3.1% only in the first quarter of the year; it always slows down after the Tet holiday. In the second quarter, when the national economy returned to normal operation and consumption and construction picked up, the GDP also increased.
We should note that only certain export items have seen significant year over year growth in the last four months, e.g., precious metals, rice, tea, pepper, cassava and garments, while over half of our exports have languished.
Some experts say the national economy is better off and shows signs of recovery. Do you agree?
Let’s be clear criteria on the criteria here. We need to agree on high the GDP growth rate should be to declare that the economy recovers, how high the credit growth rate should be, how many jobs need to be created, and so on. If we don’t have clear criteria, experts will disagree on whether a recovery of the Vietnamese economy is underway.
To date, no institution, no person anywhere in the world would dare say that their economies have escaped from the bottom of the crisis. All of them say ‘the situation remains complicated.’
In Vietnam, the value of our exports equals 72% of our GDP, while imports of goods and services amount to over 100%. That means that we are relying greatly on the world economy, at a time when the big economies in the world have not recovered yet.
It’s really important that we avoid unfounded optimism, avoid giving wrong messages that the national economy will recover in some months.
Singapore frankly says it will have minus 8% growth this year, and predicts that the stagnation caused by the crisis will last six months. That message has been released so that the Government and people can well prepare for a tough time ahead.
In Vietnam, I think that we should also warn people that difficulties persist, so that they do not cease efforts to escape from the crisis.
If instead we are groundlessly optimistic, and people all believe that everything is good though there have been no considerable positive changes, it would be very dangerous. We should look for the truth, understand the truth and tell the truth.
How do you foresee the course of Vietnam’s economic recovery?
Economists have suggested four possible scenarios for Vietnam’s economic recovery. I think that the ‘L-shaped’ scenario, i.e the economy stays flat for a long time, will not occur. We have a very competitive agricultural sector. Our agricultural exports are found all over the world and are still selling well in the context of the economic recession.
If we restructure the national economy vigorously, we may see a ‘V-shaped’ recovery (a sharp decline followed almost immediately by a strong, sustained recovery – Ed.), which is our dream.
However, I personally think that the most probable scenario for Vietnam’s economy is the ‘W-shaped’ one, which means that the economy falls, rises, then falls and rises again, because our economic management remains unstable. There are lots of things that ought to be discussed.
Experts have warned that demand stimulus packages one after another raise the risk that high inflation will return. Do you agree with the viewpoint?
Yes, I do. We have pumped huge sums of money into circulation. Besides, if the oil price keeps rising, it will push up the price of other commodities. It is very possible to see high inflation returning.
We are striving to fight an economic downturn, but the Government has allowed continual petrol price increases. What would you say about that?
Let’s be clear about this. Previously, when the world crude oil price was at $147 per barrel, the domestic petrol price was VND14,000 per litre. Now, when the world oil price is $55/barrel, our domestic petrol price is high at VND12,500 per litre.
Our petrol price is higher than in China and other regional countries; it’s quite high enough already.
If we keep raising fuel prices, we will need a miracle to keep our businesses competitive in the world’s market.
Besides, we also have problems with electricity pricing. Electric power is a monopoly good; they put the price wherever they wish, to the detriment of our industries.
Do you mean that the electricity and petrol price increases sabotage the plan of fighting the economic downturn?
Yes, I do. These price increases also make it harder to curb inflation and stabilize people’s lives, because, to put it simply, when petrol prices increase, everything else will follow.
vietnamnet, vneconomy
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