A social survey released by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) has revealed that Viet Nam may reach its target for 5.5 per cent growth this year, but only if the country can successfully restore confidence in its stuttering economy.

Viet Nam's National Assembly (NA) expects economic growth for the whole year to reach this target by keeping inflation stable, addressing vulnerabilities in the banking sector and restructuring inefficient State enterprises.

The survey, titled ‘2013: Forward-looking marcroeconomic policies for inclusive and sustainable development,' suggested that the country's economic growth has slowed amid cyclical and structural challenges over the last few years.

For example, growth decelerated 5 per cent last year, following rates of 5.9 per cent in 2011 and 6.8 per cent in 2010.

Weak growth is a result of the need to stablise the economy and curb inflation, but is also a side effect of heavy investment driven by State enterprises and the banking sector.

UNESCAP said that they appreciated the Vietnamese Government's efforts to stabilise the economy and rectify earlier expansionary policies, and praised the reduction of the inflation rate from 18.7 per cent in 2011 to 9.3 per cent last year. However, they noted that inflation still remained high in health services, education and transport, leaving average households exposed to large price increases.

They also approved social measures recently introduced by the country, particularly its decision last year to raise health insurance subsidies for the poor from 50 per cent to 70 per cent as part of its efforts to achieve universal health care coverage by 2014.

Dr Le Xuan Sang, deputy director of the Department for Macroeconomic and Information Studies under the Central Institute for Economic Management, said that in the last two years Viet Nam's macroeconomy had faced uncertainties including hiked inflation, decreased foreign currency reserves, sharply increased interest rates, and many cases of bad debt in real estate.

However, he said that things looked brighter in the first quarter of this year, with improved growth, decreased inflation, higher foreign currency reserves, a stable trade surplus and falling interest rates.

He emphasised that in the second quarter of this year, Viet Nam should disburse State budget and issue Government bonds for key infrastructure projects to continue its growth.

UNESCAP economic affairs officer Daniel Jeongdae Lee noted that Viet Nam had spent more and more money on vocational training, unemployment insurance and health care and said that such efforts to invest in people was important for long-term development.

"The economic model grow first, distribute and clean up later is no longer viable," Lee said, adding that conventional marco policies over-emphasise the importance of stablisation at the expense of development.

The UNESCAP survey revealed that the region's economic progress has been marked by widening income inequalities and a severe depletion in natural resources, and argued that marcro economic policies can play vital role in reorienting the region toward a development path .

"The 2013 survey reminds us that this is no time for complacency, as the need for a more inclusive and sustainable pattern of economic and social development continues to be critical," wrote Noeleen Heyzer, ESCAP Executive Secretary in her preface to the survey.

Source: VNS