Inflation worries
Economic statistics in 2013 reflect that the global economy has turned the corner and is on the mend.
Lower inflation rates experienced by nations throughout the world along with prevalent reports of increased economic growth and stabilised exchange rates are all positive signs the long-awaited global economic recovery is on the horizon.
However, many obstacles remain for Vietnam if the goals of sustainable economic development are to be achieved and are going to require breakthroughs in implementing reforms.
Economist Nguyen Minh Phong said the difficulties and challenges Vietnam faced in 2013 are still a burden on the national economy and the business community, especially the increased non-performing loans and depressed market competiveness.
The economy cannot thrive unless business operations gather steam, he said at a recent workshop organized by the Hanoi Economics University.
More than 79,000 newly-established businesses and around 13,000 others resuming operation in late 2013 are positive signals. |
However, there is growing concern that more than 61,000 businesses stopped operation or went bankrupt while roughly 400,000 others operated without profits.
Furthermore, most newly-established businesses are in the services sector, which reflects the reality that most production businesses are struggling to settle high inventory and maintain consumer markets.
Transfer pricing and “fake loss and real profit” among both domestic and FDI businesses badly affect State budget collection and healthy market competition.
Le Quoc Phuong from Industry and Trade Information Centre under the Ministry of Industry and Trade said the economy will confront with some disadvantages in 2014.
Weak purchasing power is not sufficient to stimulate businesses to invest in production, alongside inflation concerns.
Phuong warned high inflation is likely to return if monetary and fiscal policies are loosened to promote growth. Besides, the global economic recovery may fuel inflation, affecting Vietnam, he said.
Comprehensive reform
There is room for Vietnam to go ahead with basic solutions, said Vo Tri Thanh from the Central Institute for Economic Management (CIEM), citing agricultural production as one of the country’s development advantages.
In a New Year message, the Prime Minister stressed the need to accelerate agricultural development, technological applications, and reform, considering agricultural restructuring a priority.
This year, three major issues of both the world and Vietnam are recovery, risks and reform. Vietnam has stabilized its macroeconomy, but it needs a comprehensive reform to achieve high, steady growth, and this is no easy task.
Nguyen Duc Thanh from the National Economics University likened recovery signs to “buds sprouting out on barren soil”, requiring the State to adjust economic management policies to fuel the growth.
Thanh warned the economy will suffer a setback if no further reform efforts are made, as growth is not steady in the longer term.
He proposed that the economic stimulus policy introduced in 2010 should be adjusted, explaining if the real estate bailout package and interest rate policy continues to be in place, capital will flow into a number of sectors, and a bubbling real estate market will be created eventually.
Lawmakers should adjust policies as soon as possible to support the short-term recovery period, he said.
Economic targets for 2014 are modest and basically feasible. The 5.8% GDP growth rate will be within reach if loose monetary and fiscal policies are strictly monitored. Economic restructuring and growth model shifting should be implemented through renovating technology and improving labour productivity and quality. This process needs specific plans and roadmaps.
