Credit rating agency, Fitch Ratings, has recently retained the credit rating at B+ with stable outlook for Vietnam. Commenting on the Vietnamese government’s Resolution No 13, Fitch Ratings said that this is the flexible and crucial move of Vietnamese government to deal with challenges.
Here is an interview with the director of Fitch Ratings in Asia – Pacific region, Art Woo, around the issue.
Facing the difficulties of the economy and local enterprises, Vietnamese government has recently issued a Resolution No 13 with an aim to remove hardships for companies and the market. What do you think about this move of Vietnamese government?
Art Woo: We also have some information about the Resolution No 13 of the Vietnamese government that was issued in last Friday. We really highly appreciate the drastic move of the Vietnamese government. The country’s Q1/2012 gross domestic product (GDP) growth at only about 4 percent is lower than in the same period last year. The data on export and import, or production, particularly the high inventories of Vietnamese enterprises are the major challenges of the economy.
Therefore, the drastic actions to overcome difficulties at this time are actually needed. The group of solutions to solve problems for businesses such as postponement or reduction of taxes is truly practical for businesses that are suffering difficulties in finance and product consumption.
We will also closely monitor and evaluate the actual impact of Resolution 13 to the economy in the near future. However, we hope that Vietnam will succeed just like what has developed in the Resolution No 11. And the Resolution No 13, as far as we know, in fact, these are still following measures of Resolution No 11.
Then how do you evaluate the combination of fiscal and monetary policy in recent time of Vietnam?
Vietnam’s average budget deficit in 2007-2011 period was about 4.8 percent of GDP. Thus, in comparison with regional countries like China, Indonesia, Malaysia, Philippines and Thailand, Vietnam’s budget deficit was the highest. Therefore, the country can not apply the loosening fiscal policy and the fiscal policy alone can not promote efficiency.
Similarly, monetary policy is also doing well its enforcement by all means to reduce the lending rates for businesses. But it also will not realise its full effect without the support of fiscal policy.
Therefore, the comprehensive combination between fiscal and monetary policy of the Vietnamese government at this time is a logical step so as that businesses will be easy to get credit from many sources, not just from the banking system.
We also reckon that the State Bank of Vietnam (SBV)’s aggressive reduction of interest rates recently was a response in terms of appropriate policies before the slowdown of the economy and the cooling of inflation.
So how do you predict Vietnam’s consumer price index (CPI) this year and the country’s economic growth in general?
We believe that, Vietnam’s CPI this year will be around 10 percent, and economic growth will be at 5.9 percent.
In addition, we will specifically monitor the impacts from recent macroeconomic policies on the economy. But we also believe that the stable outlook will continue to be available for Vietnam in the next reviews.