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Vietnam’s economy in 2012: “I’m not too pessimistic,” says economist
The national economy in 2012 will have to deal with three challenges “carried forward” from 2011, according to Dr Tran Hoang Ngan, Member of the National Assembly’s Economics Committee.
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| Dr Tran Hoang Ngan, Member of the National Assembly’s Economics Committee. |
What would you say about the economic performance in 2011?
The picture of the national economy in 2011 is a mixture of the bright and dark parts. The biggest achievement is that we still can obtain the GDP growth rate of six percent, which is still lower than the targeted 7-7.5 percent, but should be seen as an encouraging result, if noting that the world’s economy is in big difficulties. ASEAN countries, for example, previously had the average growth rates of 6.9 percent, now can obtain the growth rate of 5.3 percent only.
In 2011, we can, for the first time, reduce the budget overspending to less than 5 percent of GDP. The trade deficit has also decreased significantly to 10 percent, the level which is lower than the predicted 18 percent.
However, problems still exist. As for the budget spending, though we have succeeded in lowering the overspending to less than 5 percent of GDP, the overspending has not been settled after the last many years. In 2011, we spent 9.7 percent more than the estimates, or 70,400 billion dong.
To offset the budget deficit, the government has to issue government bonds, thus becoming a rival to Vietnamese businesses, which pay tax to the state budget. This leads to the interest rate increases, thus putting big difficulties for enterprises. A lot of businesses have stopped operation, while the unemployment has become more serious.
Some experts have warned about a new economic recession, possibly to occur in 2012. What is your viewpoint about that?
I am not too pessimistic about the economic performance in 2012. However, I think that the national economy will continue facing three challenges, and if the government does not take drastic measures to deal with the challenges, we will not see more positive signs in 2012 than in 2011.
First of all, it’s the inflation. The inflation has been staying overly high over the last five years, since 2007, about 13 percent per annum, which is triple that in other regional countries. The prices increase too sharply, which has eroded people’s confidence on the government’s regulation.
There are many reasons behind the high inflation. I think that one of the problems lies in the pricing management. In principle, the prices go up and down on the supply-demand basis. However, in many cases, the prices still keep rising when they should decrease in accordance with economic laws.
Vietnam has advantages in agriculture and food production. Its food prices have increased more sharply than that in other regional countries. I think that the government needs to apply more drastic measures to control the prices.
Secondly, overly high interest rates have put big difficulties for businesses. If we cannot lower the interest rates, our businesses would be killed on the home market.
Thirdly, we will face challenges with the openness level of the national economy. With the openness of 166 percent, Vietnam has become “sensitive” to the “weather” of the world’s economy. Meanwhile, ASEAN countries, after the crisis, have narrowed their openness of the economies. Thailand, for example, has narrowed the openness to less than 100 percent, Indonesia 36.7 percent, and the Philippines 53.6 percent.
I have to remind you that all of them are the economies with exports higher than imports, and they still have to lower the openness of the economy, let alone Vietnam, an economy which still imports more than exports.
Has the government realized the challenges?
I think that the government has been aware of the challenges we have to face. It has been striving to obtain a macroeconomic stability and stand firmly amid challenges. Therefore, the government states that Vietnam will not focus on obtaining very high growth rates, but on curbing inflation and ensuring macroeconomic stability.
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