Two Economic Scenarios for Vietnam in 2010

 

The stimulus package of the Government which subsidises 4 % of lending interest rate for businesses and individuals is regarded as a medicine to strengthen businesses when they are in the worst condition. The Vietnamese economy started reviving since the middle of 2009, spurred by growing production and export in both volume and value. The policy also stimulates consumption development.

Professor Dao Nguyen Cat said the inflation is expected to be capped at 7 % in 2009 from a double-digit rate in 2008. This is the most remarkable success of Vietnam. However, amid global economic recession, Vietnam’s economic growth is estimated at nearly 5.8 % in the third quarter of 2009, totalling nearly 4.6 % in the first nine months. According to many experts, the Vietnamese economic growth will exceed 5 % in 2009, the lowest rate in eight years but a feat for a developing nation in the context of global economic crisis as Vietnam.

Professor Cat said a sustainable economy crucially depends on domestic consumption. With a population of more than 86 million people, Vietnam is currently the target of many foreign manufacturers and distributors. The question is: Why do domestic enterprises leave the potential market open? “Thus, domestic enterprises need to double their effort to encourage consumers to use Vietnamese goods with reasonable price, acceptable service and consumer trust,” Mr Cat added.

Generally, the world economic recession has bottomed out and not accelerated into a great depression. Global economies showed signs of positive growth in the third quarter of 2009. The East Asian region is recovering strongly.

“Although the Vietnamese economy has revived strongly in 2009 to create a momentum for 2010, it is foreseen to experience a “screening” of businesses in all economic sectors. According to many people, most companies do not care about macro issues; therefore, they need to restructure technological investment, stabilise their operations and introduce long-term investment strategy if they want to make success in 2010,” said Mr Lich.

Sharing this point of view, Mr Vu Thanh Tu Anh, Research Director at Fulbright Economics Teaching Programme, Harvard University, said: The Vietnamese economy is expected to recover in 2010. The GDP has grown quarter on quarter, spurred by rising industrial production value in addition to high retail growth. Nonetheless, it is noted that the growth of Vietnam is not sustainable in all short, medium and long terms. There are many long-existing structural problems such as risks in macro economy, market and policy environment and sudden changes in policy. Besides, the potential rise in prices of basic commodities may lead Vietnam to unavoidable inflation.

Although the economy has showed signs of recovery, according to experts, Vietnam, if there is no government support or too early termination of such support, will pay dear price, especially when its financial system is not stable. “It is like giving medicine to an ill person to regain consciousness and to send to work immediately,” experts compared.

According to Prof. Nguyen Quang Thai, Secretary General of Vietnam Economic Science Association, in 2010, Vietnam needs to restructure the economy and tends follow two scenarios.

Scenario one: It is the gradation - or the old model and slow reform pulled down by the short-termed tenure-based ideology and a mini crisis. Several targets like nearly 6 % growth can be achieved by promoting financial investments while productivity and efficiency are still low. Meanwhile, inflation may return as a result of macroeconomic stability (weakening the competitiveness), social insecurity due to poverty gap.

Scenario two: Vietnam will make a breakthrough and have a roadmap to promote quality, ensure macroeconomic stability, develop science technology and enhance competitiveness, productivity and efficiency to bring in sustainable economic development in the condition of stronger globalisation and international integration. To realise these, Vietnam need to change its thought and policy to lay the ground to transform into a model developed by a suitable roadmap. Focusing on three buffer years from now till 2012 to boost productivity and quality when the world is encountering difficulties, Vietnam can base on that to develop and learn in the international integration.

However, the development of enterprises will boost the national development. According to economic specialist Bui Kien Thanh, to achieve sustainable development, enterprises need to overcome difficulties in production and business and place corporate restructure on top priority, especially knowing their weaknesses to be addressed and strengths to be added ….