Weak supply-demand slows down economic growth

Vietnam witnessed an economic slowdown between January and July as demand and supply in the economy remained weak, according to a report of the National Financial Supervisory Commission.

However, this year’s gross domestic product growth is not likely to stay under 5 percent as the government is speeding up tax rescheduling and reduction as well as disbursements from the State budget to compensate for investment capital shortfalls.

Under the commission’s calculation, the GDP growth rate will be more than 5.3 percent if the entire year’s credit growth is over 6 percent. The nation is expected to see the consumer price index rise again in the coming months and inflation is forecast at around 5 percent given goods price increases globally and import pressure from China in the last quarter.

The commission also warned a great danger of high inflation in the following years if policies are overly loosened.

A decline in CPI over the past two months is noteworthy. However, if prices of food, foodstuff and fuels are not factored in, inflation in July still picked up 0.6 percent month-on-month and 8 percent compared to the same period of last year.

Concerning credit growth, the commission estimated that credit growth will increase in final months of this year but not exceed 8 percent. Besides, it will be hard to pump credits onto the economy in the near future given the lack of clear solutions for bad debts.

Commenting on developments in the January-July period, the commission said that both total demand and supply remained very weak.

For the supply side, the industrial production index increased only 4.8 percent year-on-year while in the previous year it rose up to 8.8 percent. Notably, processing and manufacturing industry posted up a modest rise of 4.3 percent.

For the demand side, most targets remained low despite improvements compared to the end of 2011. Total retail sales of goods and services rose 18.7 percent against the previous year and just 6.74 percent if inflation factors are deducted.

Meanwhile, the trade deficit was around $58 million in the period, or a meager 0.09 percent of the total export revenue, making it the record low compared to an average $9 billion annually in previous years. Notably, imports of some materials for domestic production kept falling, including animal feed and gasoline declining by 6.9 percent and 8.7 percent respectively.

Credits for the economy had yet to be improved. As of the end of July 25, the total outstanding loans fell by 0.1 percent from early this year as the total demand stayed weak and bad debts were on the rise.

The commission urged for a quick tackling of bad debts in the near future to boost credit and lower interest rates. Otherwise, any solutions of monetary policies will bring little effects.

http://english.thesaigontimes.vn/Home/business/vietnam-economy/24872/

 

Category: Economy