VietNamNet Bridge – Minister of Planning and Investment Bui Quang Vinh has said tumbling global oil prices will leave no serious impact on Vietnam’s economic growth and State budget collections this year.

Vinh briefed reporters on the possible impact of diving oil prices on the country’s economy after a meeting in Hanoi last week between the ministries of industry-trade, finance and planning-investment, the central bank and State business groups.

Prime Minister Nguyen Tan Dung, who chaired the meeting, told ministries and agencies to prepare measures to cushion the impact of the oil price plunge on the nation’s socio-economic targets this year.

He urged them to work toward realizing the economic growth target of 6.2% and curb inflation at around 5% this year. He ordered the central bank to set a credit rate that will help fuel economic growth.

He wanted ministries to stick to the targets for State budget collections and spending this year, according to the Government’s portal at chinhphu.vn.

He cited the inter-ministerial working group for macro-economic management as saying that State budget revenues would not fall sharply even if the world oil price plummeted to US$40 a barrel.

Minister Vinh told reporters that Vietnam could lose nearly VND1 trillion in oil export revenue if the price slides by US$1 a barrel and VND70 trillion if it is below US$40. But Vinh’s ministry reckoned higher economic growth and more tax collections could help offset the lost oil export revenues.

The State budget might lose revenue of VND7.5 trillion, VND9.5 trillion and VND11.5 trillion if the oil price plunged to US$60, US$50 and US$40 per barrel respectively.

Vinh said the oil export price was previously projected at US$100 per barrel but is now below US$60. This is beyond expectations, he said.

The inter-ministerial working group has drawn up three scenarios based on forecasts by international organizations, with the oil price standing at three levels: US$60, US$50 and US$40 per barrel.

Vinh said if it was US$60, the Government would consider stopping or reducing output at the fields with production cost above export price. Further reductions would be mulled if it is US$50 per barrel.

In case the price dives to US$40, the country would cut pumping by 1.8-2 million tons from the 14.74 million tons planned for fields in Vietnam and overseas this year.

“We weigh all the three scenarios. We are most concerned that when oil tumbles to below US$40 per barrel as new projects would be affected,” Vinh said.

Vinh, however, said Vietnam as a net fuel importer would benefit much from the global oil price fall. Currently, fuel prices in Vietnam are lower than in Thailand, Laos and Cambodia but only higher than in Singapore and Malaysia.

Vinh said fuel prices could be adjusted in line with other countries to prevent illegal fuel exports.

Fuel price falls will benefit various sectors, he noted.

“The Prime Minister has told agencies to consider production cost in order to bring transport charges down as this will leave positive impacts on the economy,” Vinh said.

Vinh said the economy could expand by a further 0.27% if the global oil price is US$60 per barrel, 0.31% for US$50 and 0.42% for US$40.

Vinh said the Prime Minister has ordered the ministries of finance and transport to review transport prices to make proper reductions as soon as possible in proportion to fuel price drops.

As for the power sector, Vinh said as electricity tariffs in Vietnam are lower than in many other countries, calculations should be made to ensure the supplier can earn some profit.

The Prime Minister has ordered relevant agencies to find ways to cut electricity losses and calculate power tariffs exactly and transparently.

Vietnam Electricity Group (EVN) has presented three plans for power tariff hikes but the working group has agreed not to discuss any electricity tariff increase plan until the upcoming Lunar New Year holiday (Tet).    

SGT