Economy challenges loom
16-MAY-2008 Intellasia | 13/May/2008 Thoi Bao Kinh Te Vietnam
May 16, 2008 - 7:00:00 AM
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The Central Institute for Economic Management (CIEM) has recently announced an annual economic report, which released forecasts on macro economic model for Vietnam's economy in 2008 based on three scenarios:
Based on any scenario, Vietnam's economic growth this year will be lower than our expectation after the entry into the World Trade Organisation (WTO) as well as plans set from the start of this year. Whether should we be pessimistic about Vietnam's economy this year? Thoi Bao Kinh Te Vietnam newspaper had a talk with Vo Tri Thanh, head of CIEM's International Economic Integration Policy Research Division, about this issue. Excerpts:
With three scenarios about economic growth, namely 7.6%, 7.2% and 6.7%, I still believe that the country will face up the pessimistic scenario with the growth of only 6.7%. However, we should not be pessimistic about Vietnam's economy.
We still have many optimistic macro-economic factors. Industrial production, agriculture and services till report optimistic growth, which was however still slower than the same period last year because of various problems including higher cost for input materials, epidemic diseases and others.
Our export still strongly increased in the first four months. Consumption rose more slowly than previous years, which may be resulted from the central bank's monetary tightening policy.
I think that reducing the growth target is the opportunity cost for reforms, which is more meaningful for the economy.
Do you mean that there remain good things from the lower growth target?
That may be an opportunity for reforms. Economists said that in difficult situations, crisis or changes of power agencies, reforms often occur.
Difficulties from outside also bring changes inside the country. For example, the collapse of some socialist countries in Eastern Europe made Vietnam loose aids and switch to the market economy. The WTO entry also requires Vietnam to make reforms to follow international rules.
Can you brief some factors of consumption, investment of businesses, state investment and export in 2008?
Consumption will continue growing in 2008, which is however slower than previous years.
Growth of production will slowdown, the service sector serving production will be directly impacted and will also reduce.
Amidst the current difficult situation, investment of businesses will surely not increase as highly as previously. State investment will absolutely reduce because of the investment tightening policy.
Nevertheless, export will still strongly grow in value but volume of export will not increase and many goods items have some downward signs. This can be understood that prices of export contracts this year is higher than previous years.
Foreign investment still continues highly rising. The year-on-year increase in disbursement of foreign investment demonstrates that Vietnam still gains great attention from foreign partners.
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