VietNamNet Bridge – Minister of Planning and Investment Bui Quang Vinh said Vietnam’s economic growth is on track despite unfavorable market developments stoked by China’s strong devaluation of the yuan and the world oil price plunge.

The macro economy has stabilized and the business environment has improved this year, Vinh was cited by the Vietnam News Agency as saying when the Government began a two-day monthly cabinet meeting in Hanoi on August 31.

According to the General Statistic Office (GSO), the consumer price index fell 0.07% in August over July but increased 0.61% year-on-year. In the first eight months, the CPI inched up a mere 0.83% compared to the same period last year, well below the 5% target set earlier by the Government for this year.

Last month, retail sales of goods and services totaled VND271.7 trillion (around US$12 billion), up 0.2% against July and 10.1% compared to August last year.

By August 20, nearly 1,220 new foreign direct investment projects had been approved with total investment pledges of US$7.87 billion, rising by 8.7% year-on-year. Foreign-invested enterprises had registered an additional US$5.46 billion for 389 operational projects, up a staggering 82.8% against the same period a year ago.

More than 9,300 enterprises came into existence in the month starting July 20, growing 41% compared to the previous month. In August, over 1,350 suspended businesses resumed operations.

Overall, the number of business startups in the first eight months surged over 29% year-on-year to more than 61,300 with total registered capital of VND376.4 trillion.

However, the local economy has faced new challenges, particularly after China devalued its currency plus the volatile oil price on global markets. Experts said Vietnamese exporters would have to cope with fiercer competition from Chinese exporters though the State Bank of Vietnam slightly devalued the Vietnam dong and widened the dong/U.S. dollar trading band to 3% from 1% to support exports.

More enterprises are inclined to hold on to dollar funds after the Vietnam dong weakened against the dollar, piling pressure on the local currency and the economy. A fresh fall in the world oil price has impacted on State budget collections.

In the year to mid-August, tax and fee revenues had reached VND578.2 trillion, 63.5% of the year’s target, but Government spending had totaled VND690.8 trillion including VND106.7 trillion for development investments, according to the GSO.

Speaking at a meeting with ministries and agencies last week, Prime Minister Nguyen Tan Dung said the country bucked the recent negative regional and global market developments. The Government sees no need to revise key economic targets.

However, the Government leader warned relevant ministries and agencies of the negative impact of unexpected developments in regional and international markets on the economy, and told them to closely monitor the global economy to find timely coping solutions.

To achieve economic growth of around 6.4% this year, the planning ministry said Vietnam needs to effectively implement monetary and fiscal policies, and adopt flexible policies for lending rates and the exchange rate between the dollar and the dong to prop up exports and spur credit growth.

The Government should speed up the restructuring of state-owned enterprises, and support enterprises to invest more in new technologies and improve labor productivity, especially in the sectors that contribute much to export turnover.    

SGT