Vietnam's economy has been stable for the first half of the year with aGDP growth rate of 5.18 percent and inflation at 1.38 percent. As thereremain difficulties in the year ahead, it is important to continue toconfidence-building measures in Vietnam's economy. Dr Vo Tri Thanh,Deputy Director of the Central Institute for Economic Management talksabout the issue.
*Can you highlight the country's economic picture in the first six months of the year?
Asfor macro-economics, the country's inflation was relatively low;balance of international payments were stable and became surplus; andthe fluctuation of the domestic currency was insignificant. Besides,Vietnam's foreign reserves increased sharply from a relatively low levelto 35 billion USD.
With regard to production, two signalsshowed a clear recovery. Purchasing Manager Index (PMI) has remainedhigh at more than 50 points since September 2013, while the State budgetcollections were higher than last year and also higher than theestimate.
*Inflation in the first half of this year increasedonly 1.38 percent against December last year - the lowest rise in thepast 13 years. The rise was also equal to only one-fifth of theinflation target for the whole year. Is this a good sign for theeconomy?
The relatively low inflation is one of the importantindicators to evaluate the stability of the macro economy, alongside aseries of other indicators. In a sense, it is also considered a successto pull the annual inflation down from 18.58 percent in 2011 to thecurrent rate (around 5 percent).
In this regard, we need to payattention to two issues while making a closer analysis of this index.First, in normal conditions, maintaining inflation at 5 to 6 percent inthe long run is very good. However, in terms of handling the inflation'sinstability and pulling it up to a stable threshold, it requiresauthorities to make the economy gradually stable while still having toensure that the cost of production and economic growth does not declinetoo fast. The second thing I want to mention is that inflation is stillexpected at roughly 5 to 6 percent yearly, but not deflation.
*What measures should the Government take in the current context?
Currently,we have to handle a lot of problems to simultaneously achieve targetsof macro-economic stability and economic growth recovery. This requiresthat Vietnam spend a significant resource for further integration andrestructuring the economy.
Monetary and fiscal space is notenough to build a strong recovery. For a monetary policy, we set a goalthat this year's credit growth is at 12-14 percent, associated withcontinued recovery and stability. However, after the first six months ofthe year, credit growth is very low.
For a fiscal policy, theGovernment has proposed to the National Assembly, an increase in thebudget deficit plan from 4.8 percent to 5.3 percent for 2014 and 2015.Besides, it has also suggested an additional issuance of 170 trillionVND (8 billion USD) of Government bonds for infrastructure investmentthis year and in the next two years. This is a Government's greateffort.
In addition, the Government had to spend a significant amount of money to support fishermen for the past few months.
Inthis difficult context, along with the public debt problem, fiscalspace is not much. I had hoped that Vietnam's economy will continue tobe stable and try to recover at a certain level, but cannot be toohasty. It is important for the Government to take reformssynchronically, more strongly and more drastically. This will helpVietnam's economy get back its confidence. If we can restorecredibility, it will help boost consumption and investment to createmore added value, economic growth and employment.
*What is your forecast on the economic outlook in the remaining months of the year?
TheGovernment has decided to keep the annual basic economic indicatorsapproved early this year unchanged with the economic growth of 5.8percent and inflation of below 7 percent.
Until now, it can be clearly seen that we will achieve the inflation target, with inflation expected to be 5 to 6 percent.
Foreconomic growth, the latest forecast from the World Bank showed thatVietnam's economic growth will be around 5.5 percent this year.
Meanwhile,according to the latest forecast from the National FinancialSupervisory Committee, growth will be around 5.6 percent taking intoaccount possible impacts from the Vietnam-China economic relations.
However,I think, the economic growth is not as important as the need tocontinuously rebuild the trust in Vietnam's economy through continuouslystabilising the macro-economy and drastically accelerating the economicrestructuring.
We expect a lot from major agreements such as theTrans-Pacific Partnership, Vietnam-EU Free Trade Agreement and ASEAN + 6that are expected to be signed this year and the next year. I believethis will give a ‘push' in creating confidence in Vietnam's economy, andthat is the most important and deciding factor for the country'seconomic development this year and in the years to come.-VNA
*Can you highlight the country's economic picture in the first six months of the year?
Asfor macro-economics, the country's inflation was relatively low;balance of international payments were stable and became surplus; andthe fluctuation of the domestic currency was insignificant. Besides,Vietnam's foreign reserves increased sharply from a relatively low levelto 35 billion USD.
With regard to production, two signalsshowed a clear recovery. Purchasing Manager Index (PMI) has remainedhigh at more than 50 points since September 2013, while the State budgetcollections were higher than last year and also higher than theestimate.
*Inflation in the first half of this year increasedonly 1.38 percent against December last year - the lowest rise in thepast 13 years. The rise was also equal to only one-fifth of theinflation target for the whole year. Is this a good sign for theeconomy?
The relatively low inflation is one of the importantindicators to evaluate the stability of the macro economy, alongside aseries of other indicators. In a sense, it is also considered a successto pull the annual inflation down from 18.58 percent in 2011 to thecurrent rate (around 5 percent).
In this regard, we need to payattention to two issues while making a closer analysis of this index.First, in normal conditions, maintaining inflation at 5 to 6 percent inthe long run is very good. However, in terms of handling the inflation'sinstability and pulling it up to a stable threshold, it requiresauthorities to make the economy gradually stable while still having toensure that the cost of production and economic growth does not declinetoo fast. The second thing I want to mention is that inflation is stillexpected at roughly 5 to 6 percent yearly, but not deflation.
*What measures should the Government take in the current context?
Currently,we have to handle a lot of problems to simultaneously achieve targetsof macro-economic stability and economic growth recovery. This requiresthat Vietnam spend a significant resource for further integration andrestructuring the economy.
Monetary and fiscal space is notenough to build a strong recovery. For a monetary policy, we set a goalthat this year's credit growth is at 12-14 percent, associated withcontinued recovery and stability. However, after the first six months ofthe year, credit growth is very low.
For a fiscal policy, theGovernment has proposed to the National Assembly, an increase in thebudget deficit plan from 4.8 percent to 5.3 percent for 2014 and 2015.Besides, it has also suggested an additional issuance of 170 trillionVND (8 billion USD) of Government bonds for infrastructure investmentthis year and in the next two years. This is a Government's greateffort.
In addition, the Government had to spend a significant amount of money to support fishermen for the past few months.
Inthis difficult context, along with the public debt problem, fiscalspace is not much. I had hoped that Vietnam's economy will continue tobe stable and try to recover at a certain level, but cannot be toohasty. It is important for the Government to take reformssynchronically, more strongly and more drastically. This will helpVietnam's economy get back its confidence. If we can restorecredibility, it will help boost consumption and investment to createmore added value, economic growth and employment.
*What is your forecast on the economic outlook in the remaining months of the year?
TheGovernment has decided to keep the annual basic economic indicatorsapproved early this year unchanged with the economic growth of 5.8percent and inflation of below 7 percent.
Until now, it can be clearly seen that we will achieve the inflation target, with inflation expected to be 5 to 6 percent.
Foreconomic growth, the latest forecast from the World Bank showed thatVietnam's economic growth will be around 5.5 percent this year.
Meanwhile,according to the latest forecast from the National FinancialSupervisory Committee, growth will be around 5.6 percent taking intoaccount possible impacts from the Vietnam-China economic relations.
However,I think, the economic growth is not as important as the need tocontinuously rebuild the trust in Vietnam's economy through continuouslystabilising the macro-economy and drastically accelerating the economicrestructuring.
We expect a lot from major agreements such as theTrans-Pacific Partnership, Vietnam-EU Free Trade Agreement and ASEAN + 6that are expected to be signed this year and the next year. I believethis will give a ‘push' in creating confidence in Vietnam's economy, andthat is the most important and deciding factor for the country'seconomic development this year and in the years to come.-VNA
