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Impacts of downturn could last 3-5 years, say economists
The global economic downturn’s impacts will last three to five years more with negative consequences, especially in the banking sector, economists said in Ha Noi yesterday, June 16.
The prediction was made at a seminar on improving Viet Nam’s finance market. It was organised by the Central Institute for Economic Management and the Ministry of Planning and Investment.
Economists said the economic turmoil had slowly influenced the Vietnamese economy and would, in the long run, have negative impacts on the finance system.
Viet Nam’s policy to mitigate the situation initially could help minimise difficulties and rescue many domestic businesses from bankruptcy but it could increase the risk of bad debt, inflation and budget deficit, the seminar heard.
Economist Nguyen Xuan Trinh said that together with innovation and integration the country’s finance market had been operating in a gradually improving legal framework by combining international experience with concrete situations in Viet Nam.
Trinh said finance institutes and securities firms, insurance companies, banks and capital management funds had become more diversified and competitive. Procedures in advanced finance management and international standards on transparency, accounting, auditing and supervision had gradually been institutionalised and used.
Trinh said the banking network had played a greater intermediary role in capital mobilisation and allocation. Last year banks mobilised nearly 115 per cent of the GDP and the lending reached 105 per cent of GDP.
The stock market was established and contributed to mobilising long-term investment resources.
In 2007 the total market capitalisation stood at 43 per cent of GDP. Last year it was 20 per cent lower. The bond market remained underdeveloped. However, it had begun to help the Government mobilise capital for economic development and to assist businesses to attract capital for production.
Participants discussed the effect of the downturn on the Vietnamese finance system and implicit risks to, and development prospects for, the finance market in the next decade.
They discussed ways to minimise risks and enhance healthy competition and promote development, to provide a suitable road map to enhance the development of the finance market in a sustainable and healthy manner.
Delegates emphasised that there remained a heavy financial burden which would affect the country’s economic development until 2020.
They said measures to restructure the finance and monetary system and supervision mechanism needed to be effective.
Development and improvement of the finance market was a continuous and long-term process, delegates said. It required comprehensive measures as part of the country’s economic renewal and global economic integration, plus an improved legal system and administrative reform.
VietNamNet, VietNamNews
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