Budget plans based on oil price of $45 per barrel

24-Mar-2016 Intellasia | The Saigon Times | 6:00 AM Print This Post

Though the government has set a high economic growth target for 2016 and the next five years, budget plans are based mostly on the oil price projection of $45 per barrel.

In the 2011-2015 period, the world price of crude oil was over $100 per barrel but gross domestic product (GDP) growth never hit 7 percent. Though the price dropped to $56.2 last year, GDP growth reached 6.68 percent.

However, the government has set an economic expansion target of 6.7 percent for this year and 6.5-7 percent for 2016-2020 though the world oil price is very low despite a slight rise from late last year.

However, the 2016 and 2016-2020 budget plans still rely much on crude oil revenue while collections from this channel have dipped in recent years.

Revenue from crude oil used to account for an average of 5.2 percent of GDP and 18.4 percent of total budget collections in the 2006-2010 period, but the respective ratios in 2015 were 1.6 percent and 6.8 percent.

Nguyen Minh Tan, deputy head of the State Budget Department under the Ministry of Finance, said the oil price decline has posed a budget risk.

According to the government’s 2015 socio-economic performance report, the oil price was low and unpredictable. Late last year, Vietnam National Oil and Gas Group forecast the average oil price would stay at $60 per barrel this year.

According to the Ministry of Finance, crude oil extraction would total 62.3 million tonnes in the next five years, down by 1.73 million tonnes against the Ministry of Industry and Trade’s previous forecast and around 12 million tonnes against the volume of the 2011-2015 period.

The ministry projected the average price between 2016 and 2020 at $45 per barrel, with $30-35 this year and $55-60 in 2020.

Such projections are based on the average contract price of this year hovering around $30 per barrel. According to most forecasts by international financial institutions, the price will remain low this year.

The International Monetary Fund (IMF) even estimated the average price at $30 per barrel this year, $35.8 in 2017 and smaller than $39 throughout the five years.

The country’s total budget revenue this year is put at over VND1,014 trillion while spending is projected at over VND1,273 trillion, resulting in a deficit of some VND254 trillion (4.95 percent of GDP).



Category: Economy, Vietnam

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