VietNamNet Bridge – Vietnam still has a lot of risks waiting ahead, although the macro-economy is regaining stability, said the World Bank (WB) at a press briefing on Wednesday.
“Vietnam’s economic growth has shown no sign of recovery, though the macro-economy is getting stable again…
There are still too many risks,” said Deepak Mishra, WB chief economist in Vietnam. He was speaking at the press briefing held ahead of the meeting between the Government and international donors slated for next Monday.
The first risk that Mishra mentioned was core inflation, excluding food and fuel prices, which still stood at 11% in October against the same period last year. Administrative interventions in prices only push up inflation and cause instability over a medium term, he criticized.
Additionally, Vietnam’s foreign exchange reserves are still low, only equal to 2.3 months of import, versus 7.2 months in Indonesia, eight months in Singapore, 8.5 months in Malaysia and 13 months in the Philippines.
Bad debt is another concern. The bad debt ratio is 4.93% according to the central bank, 8.82% according to the central bank’s inspection agency and 10% as reported by the governor.
“No one knows the actual ratio of bad debt. A 1% difference can be equivalent to US$1.1 billion, a very huge figure,” said Mishra.
Stable Vietnam dong/U.S. dollar exchange rate and smaller trade deficit are two bright spots in the economic picture of Vietnam, he remarked. However, the latter achievement is entirely attributed to foreign-invested enterprises, as domestic State-owned and private firms did not record growth in export.
To the question whether the Government has loosened polices to save the economy, his answer was no.
The Government no longer strives for growth at all cost, but instead puts macroeconomic stability on top priority, the expert explained.
This is a lesson from 2009, when fiscal and monetary policies were loosened, pushing up inflation.
Long-term growth of Vietnam is being hindered by economic restructuring, including restructuring of banks and State-owned enterprises, which are moving at a slow pace and lack efficiency, he said.
Investors want the Government to take actions, such as drawing up a specific equitization schedule, reducing State budget allocations and disclosing information about State-owned enterprises, he emphasized.
WB forecast Vietnam’s GDP growth at 5.5%, CPI increase at 8% and credit growth at 12% in 2013.
In an interview days earlier with the Daily, Vo Tri Thanh, vice president of the Central Institute for Economic Management, said the policies had been excessively loosened for a period of time and now they must be really tightened.
The monetary policy sets a credit growth target of 15% per year from now to 2015, compared to 30% in the previous period. Meanwhile, State budget deficit has been lowered from 5% of GDP to 4.8% at present and will further go down to 4-4.5% by 2015.
“Macroeconomic stabilization in line with monetary tightening is now a clear view, and we have to do so,” he stressed.
Vietnam is undergoing restructuring, which requires great resources. In this context, it is not easy to further stabilize the macro-economy and obtain higher growth, Thanh said.
The problems of bad debt and the property market cannot be solved in just one year.
“However, what we hope for is consistency in policies is respected. Vietnam should begin actual reforms, and people are expecting results,” he underscored.
Industrial inventory has declined, but it may take 3-4 years to settle property inventory. Meanwhile, the Prime Minister said bad debt would be handled from now to 2015, meaning it would take three years to bring down the bad debt ratio from 8.82% to 3%.
Bad debt is not a simple problem, he stated. The biggest challenge when dealing with bad debt is transparency.
“The public is very displeased at the so-called ‘interest groups’ in a bad sense. You know what I mean? The problem lies there,” he said.