|
When the confidence declines
Vietnamese economists have expressed their concern about the investors’ and people’s confidence decline, stressing that the problem “is even more serious that any serious problem of the national economy.”
Dr Le Xuan Nghia, Deputy Chair of the National Finance Supervision Council, said at a recent conference that Vietnam’s national economy has never before witnessed such a bad quarter in both terms of the international prestige and macroeconomic risks, like in the first quarter of 2011, even though the growth rate seemed to be higher than that of the same period of 2009.
According to Nghia, the fact that Standard & Poor’s has lowered the national debt credit ranking by one grade from BB to BB-, the lowest level in South East Asia, shows that the investors’ confidence on Vietnamese macro policies has been declining, which should be seen as an extremely worrying problem. With BB-, Vietnam’s credit ranking is just equal to that of Bangladesh or Mongolia.
“Vietnam’s national economy proves to be easily to be hurt not only by the shocks from outside, but also by the shocks caused by itself,” Nghia said. Meanwhile, Thailand, despite the political uncertainties, has continuously gained higher grades, which is now ranked the 8th in the world.
The imbalanced structure of the national economy, in which public investments “absorb” nearly all the national resources; the banking bad debt ratio increase from 2.16 percent by the end of 2010 to 3.1 percent by the end of June 2011; the high proportion of irrecoverable debts at 47 percent; the high proportion of real estate credit at 10.8 percent of total outstanding loans; and the foreign currency reserves decrease all have been cited by Nghia as the worrying threats to the national economy.
According to Vo Tri Thanh, Deputy Head of the Central Institute for Economic Management (CIEM), when talking about the confidence decline, this means the confidence in the government’s capability to stabilize the macro economy and the confidence in the local currency.
“The Vietnam dong has become too cheap,” Thanh said.
Regarding the macroeconomic stabilization, people have lost confidence because a lot of promised things have not been done. The high inflation, trade deficit and state budget overspending – the chronic diseases of the economy - have not been improved.
The biggest problem in the macroeconomic management, according to Thanh, is the confusing policies which makes it unable for investors to program their business strategies.
To date, it remains unclear if Vietnam prioritizes the economic growth or macroeconomic stability.
Thanh related that he once heard the complaint from a businessman at a meeting at Amcham that he cannot understand the government’s policy well.
The government’s resolution 11 on fighting inflation has conveyed a strong message that macroeconomic stabilization will be the top priority task for the government. However, at a meeting with the key state owned economic groups, the government instructed the groups to obtain the high growth rate of 15 percent in 2011.
“In order to restore the confidence, the government needs to be consistent with its policies,” Thanh said.
Recently, the State Bank unexpectedly slashed the interest rates on the open market operation (OMO) from 15 percent to 14 percent in early July. Thanh said that right after the decision was released, he received the calls from three big guys who asked if these should be seen as the move by the Vietnamese Government to loosen the monetary policies.
Nghia also said that he has received inquiries from the World Bank WB and International Monetary Fund IMF on the decision. Though Nghia thinks that the OMO interest rate reduction has no considerable relation with the market interest rates in general, he still thinks that the reduction should not be a “good idea” because it may make people understand that the monetary policies have been loosened.
vietnamnews, SGTT
|
