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Vietnamese economy showing signs of recovery: World Bank
The Vietnamese economy is showing signs of recovery after a “considerable” slowdown in growth last quarter, helped by construction and higher commodity prices, the World Bank said Monday.
Gross domestic product expanded 3.1 percent in the first quarter from a year earlier, according to the General Statistics Office in Hanoi. The previous weakest expansion was 3.8 percent in the first quarter of 1999, the first year for which quarterly figures are available.
“The news is not all bleak,” Victoria Kwakwa, the Hanoi-based country director for the World Bank, said at a conference in Ho Chi Minh City. “The construction sector seems to be picking up. Globally, commodity prices are picking up and this should also help.”
Prime Minister Nguyen Tan Dung had said in April the government plans to spend about US$8 billion in stimulus spending to support the economy, which has been hurt by the worst world recession since the Great Depression. The government’s 5 percent 2009 growth target is “very challenging” given the global environment, Minister of Planning and Investment Vo Hong Phuc said Monday.
A “strong and quick” government response to the slowdown through stimulus spending has contributed to the nation’s recovery, Kwakwa said. Vietnam’s economy has been resilient and the last two months have seen an improvement, she said at the Vietnam Business Forum, which is held twice a year to give companies an opportunity to raise issues with the government.
Stimulus spending may boost Vietnam’s fiscal deficit to as much as 9.8 percent of GDP, the Asian Development Bank said in April. The government’s measures to support the economy include subsidizing loans to companies.
‘Visible upturn’
The reopening of credit lines in Vietnam has resulted in a “visible upturn in construction activity,” the UK-listed Vietnam Property Fund Ltd. said last month. A recent improvement in steel and machinery imports points to increased infrastructure spending, according to Dragon Capital, which manages the fund.
“The nation’s economy has started to pick up from April, and in May,” Phuc said. “The industrial sector is recording significant growth.”
Still, some Vietnamese companies have been “severely affected” by the slowdown, and foreign investment commitments have declined, Kwakwa said. The government must ensure that no macroeconomic “difficulties” result from stimulus spending, she said.
“It will be important to monitor the macroeconomic effect and to adjust its implementation as needed,” Kwakwa said.
Minister Phuc said the government is open to suggestions and ideas from the business community and willing to amend regulations to remove difficulties and further facilitate investors.
Bottlenecks
The government would focus on improving regulations to attract more investors in developing human resources and infrastructure, which are the country’s major “bottlenecks,” Phuc said at the conference.
Thomas R. Siebert, chairman of the American Chamber of Commerce, said the chamber has voiced concerns about infrastructure deficiencies and inadequate logistics in Vietnam for years.
The deficiencies and delays in the development of key infrastructure, including roads, bridges, power plants and seaports have hampered the country’s manufacturing and export sectors, he said.
Siebert called on the government to facilitate private investors in developing, funding and managing infrastructure.
Brian O’ Reilly, a board member of the Australian Chamber of Commerce, said the standards for education and training in Vietnam were inadequate.
He cited a recent survey by the World Bank which found 60 percent of vocational school graduates needed retraining on the job.
Employers have complained about the education system which leaves graduates lacking necessary practical and technical skills, he said.
The government should seek closer engagement with the business community to ensure that education and training services are designed to meet the needs of its economy, said Reilly.
He said the business and regulatory environment should be designed in a way that encourages foreign investors to deliver education and training services in Vietnam.
ECONOMIC BOTTLENECKS THE MAIN HURDLE, SAYS WB COUNTRY DIRECTOR
“To untie carefully the economic bottlenecks remains one of the major tasks for Vietnamese government in the second half of the year,” World Bank’s Country Director Victoria Kwakwa told reporters Monday on the sidelines of the Vietnam Business Forum 2009 in Ho Chi Minh City.
Vietnam has been hit by the crisis, but is doing much better than other economies. While most other economies, including those in the region, have been shrinking, the Vietnamese economy is still growing, although at a slower pace, she said.
“So, yes it has some adverse impacts but we also see the signs, some very early signs that things might be picking up. So it’s very important in the next round of stimulus planning to make sure that these early signs will become actual recovery. We’re hopeful that could be achieved in the second half of the year,” Kwakwa said.
Kwakwa said the Vietnamese government “has been doing very well in handling the crisis.”
Asked for her assessment of the stimulus package that the government has been implementing, the World Bank country director said that “the numbers of the real economy coming out for March and April show it’s strengthening. We see also in the construction sector that things are picking up, which is a big sector of the economy.
“We’re not too worried about the performance on the financial market, or the financial sector. The first part of stimulus plan, it has provided us some refinancing possibilities, and also made sure that access to credit was not severely curtailed and the banks’ profitability appears to be improving and that’s also something that should be consolidated in the next part of stimulus package.”
She stressed the importance of paying attention to “the stabilization elements of economic policies,” noting that the previous focus had been on growth. “As you implement more efforts to stimulate the economy, you would want to be careful about the macroeconomic side of it as well.”
Answering a question about her expectations concerning the amount that will be pledged at the final consultative group (CG) meeting in December, Kwakwa said it was difficult to say anything at this moment.
Minh Quang - Vinh Bao
thanhnien, bloomberg
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