The global economic recovery that is now underway will slow later this year as the impact of fiscal stimulus wanes while financial markets remain troubled and private sector demand lags amid high unemployment, according to a the Global Economic Prospects 2010: Crisis, Finance and Growth Report released by the World Bank.
Developing countries, including Vietnam, will face higher borrowing costs, lower levels of credit, and reduced international capital flows as international financial conditions tighten. The World Bank predicted global GDP, which declined by 2.2 % in 2009, is expected to grow 2.7 % in 2010 and 3.2 % in 2011.
Prospects for developing countries are for a relatively robust recovery, growing 5.2 % this year and 5.8 % in 2011 - up from 1.2 % in 2009. The East Asia and the Pacific region led the rebound in the global economy last year, reflecting robust fiscal policy steps and strong domestic demand.
Mr Hans Timmer, Director of the World Bank Prospects Group and Co-author of the report, said: The immediate impacts of the crisis (including a freezing up of credit markets, a sharp reversal of capital flows, and the precipitous equity market and exchange rate declines that ensued) are largely in the past. Since March 2009, stock markets in high-income and emerging economies have recovered roughly half the value they lost, with developing economies rebounding somewhat more strongly than high-income ones. Stock market volatility has receded.
Mathias Duhn, Director of European Chamber of Commerce in Hanoi (Eurocharm), said: Growth figures will be very impressive at 5.32 % in 2009 (6.9 % in the fourth quarter of 2009) and expected at 6.5 % in 2010. “The relatively good standing of the Vietnamese economy could be attributed to three reasons. First, Vietnam’s integration into international financial markets that triggered the crisis in the first place is still at a comparatively low level. Second, the Vietnamese Government reacted soundly and swiftly to the crisis by implementing the stimulus package. Third, Vietnam’s domestic markets were relatively strong so Vietnam was not hit as hard by declining foreign direct investment (FDI),” said Mr Mathias Duhn.
However, according to Mr Matthias Duhn, the biggest challenge for Vietnam this year was to carefully balance growth without fuelling inflation while creating sustainable long-term solutions for the country. He said the Vietnamese economy is still relatively small in scale and businesses are very reactive to monetary or fiscal policies. Therefore, he believed that carefully tightening monetary policies and ending the stimulus is a reasonable action under these circumstances. This is also the message for enterprises which need to be self-responsible for their operations and the government only intervened in case of actual emergency.
According to Mathias Duhn, Vietnam’s integration into the world market is still in the first state and mainly relying on export of raw materials. Thus, to develop the economy sustainably, [Vietnam] needs to switch from exporting basic commodities to higher graded, higher valued ones in the long term, especially in high tech industry.
Tran Dinh Thien, Director of the Vietnam Economics Institute, expressed his concern about the imbalance of the Vietnam’s economy. He said that Vietnam had sailed through the economic downturn but the existing weaknesses of the economy were serious problems without answers. Thien said the current market structure is underdeveloped and inconsistent; input market and most basic human resources have low level; human resources fail to meet the requirement. Besides, although the business sector is reacting flexibly, it remains weak and lacks adherence. Facing the crisis, governance capacity fails to meet the needs. Bottlenecks in infrastructure development like urban traffic, power and water supply systems, etc. have not been cleared.
Mr Hans Timmer said Vietnam is an emerging market and has a lot of growth potential. To grasp all opportunities in the current context, according to Mr Hans Timmer, Vietnam should implement policies as others are doing to enhance competitiveness. Successes of East Asian economies in the recovery period are not simply coming from economic stimulus programmes but, more importantly, such stimulus packages aimed at bolstering productivity and create opportunities for businesses and the result is the creation of new investments. Hence, they can gain high growth rates and create new opportunities for economies with high income. Importantly, the governments need to have proper policies to grasp new opportunities.
Hai Anh
Vietnamese
