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Though ‘treading a tightrope,’ Government economists express confidence
The Government’s economic strategists find reason for pride in the first half 2009 results. They say that if Vietnam’s unique stimulus policies are implemented resolutely and flexibly, there’s nothing to fear.
Nguyen Xuan Phuc, Minister in the Prime Minister’s Office: We’ve kept our balance
We must maintain high economic growth rate and fight inflation at the same time. That’s really a great challenge for us and can be described as ‘walking on a tightrope.” Though it’s difficult to keep one’s balance in such a situation, the Government has done it well well in the first half of the year, and can continue to do so in the last six months of the year.
We saw an economic downturn, but the national economy has not fallen into recession or crisis. The Government’s initiatives have been effective. As we go forward, guidance will be both decisive and flexible to ensure our attainment of the economic and social targets that the National Assembly has established to get the country through this difficult period.
The Government was on top of the changing situation, and we’ve dealt with the negative impacts of the global economy, keeping Vietnam’s economy from falling into crisis. Little by little, stability and growth are returning.
We have been both flexible and determined in economic management. That’s clearly seen by the shift of emphasis from fighting inflation to fighting economic downturn. We haven’t just put forward short term measures but have also enforced medium and long term measures, including measures to restructure the national economy in the post crisis period.
Bui Xuan Khu, Deputy Minister of Industry and Trade: Second half exports will surely grow
In order to obtain the export target of $64.68 billion in 2009, three percent more than in 2008, Vietnam must export $37 billion worth of products in the second half of 2009, i.e $6.2 billion a month. This is really a very high figure. Achieving it will require drastic policies.
However, exports will get a boost from the rising prices of industrial products, especially crude oil.
In the first quarter of 2009, a lot of enterprises ưere forced to stop or reduce production. In May and June, however, garment and footwear industries saw improvement. More export contracts were signed. We exported $4 billion worth of garment products in the first half of the year, down by 1.3 percent over the same period of 2008. Footwear exports were $2 billion, off 8.8 percent. The good news was that footwear exports to the US increased by nine percent.
Nguyen Ngoc Bao, Director of the State Bank’s Monetary Policy Department: Interest rates will be stable
The State Bank of Vietnam has announced the same basic interest rate of 7 percent for July. That shows that the bank strives to hold the market interest rate steady, because:
First, the national economy in the first half showed positive changes: GDP grew by 3.9 percent, consumer price index increased by only 2.68 percent, the trade deficit was held to only $2.1 billion.
Second, business activity -- both enterprises and households -- improved. According to the Vietnam Chamber of Commerce and Industry, 91 percent of enterprises have been able to stabilize production and employment.
Third, the money market and banking operations have been stable. Capital is being used productively.
Last, the State Bank and ministries are predicting better economic conditions in the last months of the year
Do Thuc, Deputy General Director of the General Statistics Office: Output may grow by five percent
GDP has grown by 3.9 percent in the first half. To obtain the five percent growth rate target, we need to exceed the second half of 2008 level by 5.9 percent. Considering the figures we have got, especially for agriculture production in April, May and June, we believe five percent or better GDP growth for the year is within reach.
Inflation this year is lower. Except in February when the commodity price index climbed 1.17 percent, and March, when it fell by the same 1.17 percent, reflecting spending for the New Year holiday, changes were less than one percent in other months. We expect the modest May-June rate of price creep to be maintained for the rest of the year.
Therefore, if we implement Government policies well, we’ll hold inflation to only seven or eight percent, meeting the target.
Le Xuan Nghia, Deputy Chairman of the National Finance Supervision Committee: Vietnam’s demand stimulus programme is unique and effective.
The special characteristic of Vietnam’s demand stimulus package is that we only subsidize borrowing rates, while we do not lower deposit interest rates, to avoid falling into a ‘liquidity trap.’
Experts say that if the US or Japan lower their interest rates to zero, people will still make deposits at banks. It is because bank accounts there are used to pay for daily purchases and water and electricity bills. The people do not care about interest rates.
However, the situation is quite different in Vietnam. If we lower the lending interest rate to 5-6 percent, the deposit interest rate will fall to 3 percent. At that level, no one will put their money in banks, but instead buy foreign currencies, stocks or real estate, or simply lend to each other.
If people don’t deposit money in the banks, the whole banking system will soon collapse.
The 4 percent interest rate subsidization programme also creates leverage. A business, which sees other businesses borrowing money at preferential rates, will also want to get these loans. But to get such loans, they have to show a realistic capability to earn money to pay debts. As such, the interest rate subsidy programme can help maintain enterprises’ production.
As for banks, they will try to pump up lending, because only by providing loans can the banks profit from the four percent interest rate subsidy.
As such, both the lenders and borrowers have incentives to expand credit.
In the US, the Government has poured money into banks, hoping that banks will open their doors widely to borrowers. However, the banks do not lend money, but deposit money at the central bank, because they fear they will lose money on loans. Therefore, credit stays flat.
The measures that our government has been implementing really are unique in the world, but their stimulative effect is quite strong, they have sustained confidence and avoided falling into a liquidity trap.
As for inflation, which is the highest risk, we cannot avoid it entirely. But we need to hold it to the lowest possible rate. Less than ten percent is as good as we can hope for.
VietNamNet, TBKTVN
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