VN economy in 2014: gains and losses
Policymakers and leading economists all have expressed their optimism about the economic performance in 2014, though they noted that some structural problems have not been settled.
“Domestic and international reports about Vietnam’s economy in 2014 all show a common conclusion that Vietnam’s macro-economy became more solid and stable than in 2013,” said Professor Vuong Dinh Hue, Head of the Communist Party’s Economics Committee.
“The inflation rate was much lower than the ceiling rate set earlier by the National Assembly, while the GDP growth rate was higher than what was targeted,” Hue said, emphasizing that this was the biggest achievement of 2014.
The Vietnamese financial and monetary market has got more stable with lower deposit and lending interest rates, a stable dong/dollar exchange rate, and the Vietnamese stock market now listed among the five fastest-growing markets in the world.
Hue also pointed out that Vietnam has gained significant achievements in its economic restructuring process.
The state-owned enterprise restructuring has been proceeding faster, especially after the government released Resolution No 15 allowing enterprises to sell shares at prices below book value. Enterprises have step by step withdrawn their investments from non-core business fields with the withdrawn capital in the first 10 months of 2014 higher by 3.5 times than the previous year.
Meanwhile, the reshuffling in public investment has gradually helped improve investment efficiency. The ICOR (incremental capital output ratio) is expected to decrease to 6.5 in 2011-2015 from 6.96 in 2006-2010. Meanwhile, the ICOR of the state economic sector fell to 7.5 in 2011-2013 from 9.6 in 2006-2010.
Nevertheless, Hue admitted that challenges still exist in the national economy. “Though the situation is getting stable, some macroeconomic balances remain not solid enough, especially state budget income and expenditures,” he said.
According to Hue, it would be reasonable if 50 percent of total expenditures were reserved for regular spending, 25-30 percent for investment and development and 15-20 percent for debt payments.
Citing a report from the General Department of Taxation (GDT) that only 30 percent of operational businesses pay corporate income tax, Hue emphasized that the majority of businesses still face major difficulties.
Meanwhile, economists tend to look to the facts with dubious eyes.
Le Dinh An, a renowned economist, and former director of the nation’s socio-economic information and forecast center, noted that the higher GDP in 2014 than 2013 was mostly due to the sale of one more million tons of crude oil and 500,000 tons of coal.
“When your income is not big enough to cover your basic needs, you will have to sell your assets – the minerals – to get more money for spending,” he said.
