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Industrial output hits two-year low
The index of industrial production (IIP) in the first four months of the year surged only 4.3 per cent over the same period last year, the lowest level for the past two years, the General Statistics Office reported.
In the economic downturn of 2010 and 2011, the index still increased by 7.9 per cent and 10 per cent during the same period, respectively.
Processing and manufacturing, which account for more than 75 per cent of the country's total industrial production value, rose only 3.8 per cent the first quarter. The industry grew 12.4 per cent during the same period last year.
Within the processing and manufacturing industry, the IIP for cement, vehicles, iron and steel, ceramics, and electric cable and line decreased between 6.5 per cent and 27 per cent over the same period last year.
The mining industry saw an even more gradual rise of 2.6 per cent.
Water and gas production and distribution surged 14 per cent.
GSO expert Vu Quang Ha attributed the results to decreasing consumption demands in both domestic and foreign markets.
"Industrial producers are suffering from high inventory that has caused them to shrink production," Ha explained.
The consumption index of the processing and manufacturing industry had risen only 3.5 per cent as of April 1, resulting in an inventory index of 32.1 per cent, three times higher than the same period in previous years.
Some industrial products reported very high inventory, such as plastics with 102.2 per cent, prefabricated iron products with 101.5 per cent, and fruit and vegetable processing and preservation with 94.8 per cent.
Production and processing of beer, seafood, animal feed, automobiles and motorbikes, textiles and garments, cement and fertiliser also saw a high inventory of between 30 per cent and 60 per cent.
The Ministry of Planning and Investment said industrial production during the first four months of the year faced many challenges due to accelerating input costs, high interest rates, low consumption and high inventory.
Small- and medium-d enterprises and those in the processing and manufacturing industry were the most vulnerable, and the ministry recommended that the Government focus on boosting industrial production as it would be a key factor to help the country maintain a GDP growth rate of 5-5.6 per cent this year. The industrial sector last year contributed roughly a third of the country's GDP.
The Ministry of Industry and Trade has tried to find new consumption markets and promote trade programmes in a move to help producers boost exports.
Despite a lack of capital, many producers are still reluctant to borrow from banks due to high lending interest rates.
Experts called on the Government to cut the rates again to help ease difficulties for businesses as part of the plan to accelerate the economy.
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