Three scenarios for Vietnam’s economy

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Vietnam’s economic growth, hit by high inflation, shrinking exports and bad debts, is expected to slow to 5.1 per cent in 2012 from 5.89 per cent in 2011, and clearly remains below the target of the country’s Planning and Investment Ministry of 6 to 6.5 per cent forecast earlier this year.

The Vietnam central bank in the first half of 2012 tightened lending to help control inflation, making it difficult for domestic firms to access fresh funds. Lending only eased from the second half of the year when Hanoi projected a stabilising inflation rate. Vietnam’s consumer price inflation stood at 18.58 per cent in 2011, the highest since 2008 when prices jumped 22.97 per cent. This year’s annual inflation is forecast at 7.5 per cent.

The International Monetary Fund said “persistently high core inflation with weak demand conditions may still indicate higher inflation expectation”, while reform of the banking system, facing high bad debt and slow lending, was slower than expected.

Economists have now outlined three alternative scenarios for Vietnam’s economy for 2013 during a meeting held by the National Center for Socio-Economic Information and Forecast on December 9.

Scenario 1

The first scenario says the Vietnamese economy in 2013 would grow by 5 per cent, provided the global economy grows by 2.8 per cent and development investment capital rises 5.5 per cent. Vietnamese exports to major markets like the European Union, Japan and the US would be curtailed by the slow recoveries of these economies. Slowing growth in India and China, on the other hand, would offer a competitive opening for Vietnam, which could still offer labour and input costs to foreign investors lower than these regional giants.

Scenario 2

The second scenario concludes Vietnam’s GDP would increase by 5.68 per cent, including a 16.3 per cent jump in exports if the global economy grows by 3.3 per cent, and development investment capital rises 11 per cent. In this scenario, the Eurozone emerges from its crippling bad debt crisis, the political tensions arising from sea and island sovereignty disputes ease, the US economy recovers substantially, and the Japanese economy perpetuates 2012’s stabililty.

Scenario 3

For the third scenario, Vietnam’s economy would see a GDP growth rate of 6.34 per cent in addition to the 16.3 per cent export increase. This hypothetical is based on the steady recovery of the global economy and provided the Vietnamese Government would undertake effective measures to stimulate domestic production and lower bad-debt levels.

The experts have concluded that the second scenario is the most likely to eventuate in 2013, but they, however, stressed the important role to be played by corporate restructuring, especially at state-owned enterprises, to reduce waste in the use of state capital and create a healthier competitive environment among enterprises.

 

 

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Reading Time: 2 minutes

Vietnam’s economic growth, hit by high inflation, shrinking exports and bad debts, is expected to slow to 5.1 per cent in 2012 from 5.89 per cent in 2011, and clearly remains below the target of the country’s Planning and Investment Ministry of 6 to 6.5 per cent forecast earlier this year.

Reading Time: 2 minutes

Vietnam’s economic growth, hit by high inflation, shrinking exports and bad debts, is expected to slow to 5.1 per cent in 2012 from 5.89 per cent in 2011, and clearly remains below the target of the country’s Planning and Investment Ministry of 6 to 6.5 per cent forecast earlier this year.

The Vietnam central bank in the first half of 2012 tightened lending to help control inflation, making it difficult for domestic firms to access fresh funds. Lending only eased from the second half of the year when Hanoi projected a stabilising inflation rate. Vietnam’s consumer price inflation stood at 18.58 per cent in 2011, the highest since 2008 when prices jumped 22.97 per cent. This year’s annual inflation is forecast at 7.5 per cent.

The International Monetary Fund said “persistently high core inflation with weak demand conditions may still indicate higher inflation expectation”, while reform of the banking system, facing high bad debt and slow lending, was slower than expected.

Economists have now outlined three alternative scenarios for Vietnam’s economy for 2013 during a meeting held by the National Center for Socio-Economic Information and Forecast on December 9.

Scenario 1

The first scenario says the Vietnamese economy in 2013 would grow by 5 per cent, provided the global economy grows by 2.8 per cent and development investment capital rises 5.5 per cent. Vietnamese exports to major markets like the European Union, Japan and the US would be curtailed by the slow recoveries of these economies. Slowing growth in India and China, on the other hand, would offer a competitive opening for Vietnam, which could still offer labour and input costs to foreign investors lower than these regional giants.

Scenario 2

The second scenario concludes Vietnam’s GDP would increase by 5.68 per cent, including a 16.3 per cent jump in exports if the global economy grows by 3.3 per cent, and development investment capital rises 11 per cent. In this scenario, the Eurozone emerges from its crippling bad debt crisis, the political tensions arising from sea and island sovereignty disputes ease, the US economy recovers substantially, and the Japanese economy perpetuates 2012’s stabililty.

Scenario 3

For the third scenario, Vietnam’s economy would see a GDP growth rate of 6.34 per cent in addition to the 16.3 per cent export increase. This hypothetical is based on the steady recovery of the global economy and provided the Vietnamese Government would undertake effective measures to stimulate domestic production and lower bad-debt levels.

The experts have concluded that the second scenario is the most likely to eventuate in 2013, but they, however, stressed the important role to be played by corporate restructuring, especially at state-owned enterprises, to reduce waste in the use of state capital and create a healthier competitive environment among enterprises.

 

 

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