|
Government needs to restore confidence in VND
According to International Monetary Fund (IMF) lack of dollar is not the reason for the depreciation of the Vietnamese dong. Instead, the key issue at the moment is that Vietnamese people do not want to keep the Vietnam dong. Therefore, the government needs to do more to restore public confidence in the local currency.
An online roundtable talk was organized by VietNamNet’s Vietnam Economic Forum on November 11, to discuss the factors hindering Vietnam’s economic growth. The invited guests included the World Bank Vietnam Country Director Victoria Kwakwa, Senior Resident Representative of the International Monetary Fund (IMF) Benedict Bingham, and Head of the Vietnam Economics Institute Tran Dinh Thien.
As the year 2010 is nearing its end it is now clear that the government’s flexible management has brought many significant economic achievements. However, many problems have still remain which could be the latent sources of uncertainties for the macroeconomyin 2011. The inflation rate remains unknown, while the gold and foreign currency prices have been fluctuating, and the bank interest rates remain sky high, thus hindering the production sector. The weakness of state owned economic groups and general corporations, the overspending, the high level of public debt, poor infrastructure and low quality of labour force are other big concerns.
Our invited guests, who are all prestigious economists offered their analyses and advice on the current problems of Vietnam’s economy.
VietNamNet would like to introduce part 1 of the online roundtable talk.
Viet Lam, VietNamNet Journalist: The first question now for our three guests is: What do you think about Vietnam’s economy performance in 2010?
Victoria Kwakwa, the World Bank Vietnam Country Director: Thank you for the question. I’m so glad to be here to join the online roundtable talk. My comments about Vietnam’s economic development in 2010 comprise two parts.
First, regarding the economic growth and macroeconomic stability, it is clear that Vietnam has optimistically escaped from the world’s global economic recession with increasing exports, increasing foreign direct investment and satisfactory growth rate. I believe that the targeted economic growth rate of 6.5 percent set by the Government of Vietnam for 2010 proves to be completely achievable.
I think that the challenge for Vietnam would be the macroeconomic stability in short term. Since late 2009, the Government of Vietnam had focused on some measures aiming to ensure the macroeconomic stability. Especially, it had tried to strengthen the fiscal policy and tighten the monetary policy.
The good policies showed their effects in the first months of the year: the fear for high inflation decreased, while the foreign currency market was stabilized.
However, in the last few months, I can see some changes in the economic environment with uncertainties such as the high inflation rate risk and the fluctuating dong/dollar exchange rate.
I think that the Government of Vietnam has been aware of the increasing uncertainties over the last few months and it has taken timely measures to re-stabilise the market and restore the public confidence.
I think that it is necessary to keep a closer watch over the economic performance, while suggestions in policies need to be put forward in order to maintain the stability. I believe that my colleague Bingham can give clearer comments on the issue.
Senior Resident Representative of IMF Benedict Bingham: I agree with Mrs Kwakwa. I think that one of the matters of the public concerns now is why the Vietnam dong is depreciating, though the economy shows many positive signs as Mrs Kwakwa has said. For example, Vietnam completely can obtain the growth rate of 6.5 percent this year, while the exports have been recovering and foreign direct investment has been increasing. In such conditions, the depreciation of the Vietnam dong is really a topic of public interests.
This is really a topic of public interests also because things are going on the opposite way in other regional countries. In the world, the capital flow is running to the countries with high economic growth rates and dynamic economies in East Asia. The capital flow is running so strongly that some Asian countries even have to apply the measures to restrain the capital flow in order to ease the pressure on their local currencies.
Then a question has been raised that why Vietnam, one of the most dynamic economy in the region, is facing a problem, which is completely different from the problem of other countries, the depreciation of the local currency.
It is clear that the problem here is not the lack of the dollars. The trade deficit was big in the first half of the year, but the foreign capital flow (Foreign direct investment, foreign portfolio investment and kieu hoi – overseas remittance) was even bigger.
I strongly believe that Vietnam has enough dollars for the national economy, and that the dollar shortage is not the problem of Vietnam’s economy.
I think that Vietnamese people do not want to keep Vietnam dong at this moment, for two reasons.
First of all, as Mrs Kwakwa said, at the beginning of the year, the policies focused on stabilizing the national economy aiming to ease the inflation and the pressure on the dong. With such policies, people had big confidence in Vietnam dong.
However, in the second half of the year, the policies seem to diverge from the initial goal. Instead of stabilizing the macroeconmy, the policies have been focusing on economic growth. In such a situation, people think that the high inflation may return, and they become worried about their deposits in dong.
I can see that Vietnamese investors are very wise and flexible. When they see the inflation increasing and the interest rates decreasing, they quickly shift to inject money in gold and dollar instead of keeping dong.
I believe that the Government needs to make more exertions and set up strong policies in order to restore the confidence of dong depositors.
We can also see another problem which is a hot topic now on the agenda of the ongoing National Assembly’s session – the public debt. People can see the high public debts, and they can see the problems of big state owned economic groups, and they fear that the public debts will have negative impacts on their savings in dong.
It is necessary now to send a message to Vietnamese voters that the Government will make every effortto reduce the public debts.
Head of Vietnam Economics Institute Tran Dinh Thien: Besides the achievements, we can also see that our economy’s “chronic diseases”, such as the budget deficit, trade deficit, or high inflation, have not been cured. There are also some developments which may make people lose confidence in the government’s? policies
I hope that our invited guests will have deeper comments on long term weak points of Vietnam’s economy.
Regarding the short term problems, I think there are two problems.
First, the message conveyed through? policies is inconsistent. Second, the implementation of the policies is not good, therefore, in some cases, different policies may contradict or cancel each other. 2010 is the final year of the 10-year strategy, while 2011 will mark the beginning of a new 10-year strategy
VietNamNet, VEF
|
