Macro-economic Stability: Long-term Development Vision

According to economic experts, the global economic crisis is a good opportunity for Vietnam to restructure the economy. In 2010, Vietnam must strongly advance its reform and any further delay will cause structural weaknesses to fall into more risks.

 

Previously, for a long time, Vietnam put growth on the top of priority and kept the economic growth high at the cost of inflation, with loosened monetary and fiscal policies. With those policies, the economic achievements are very encouraging but, in a long term, this will cause resources to be irrationally distributed, investment to fall and thrift to be affected, which will lead to economic shocks and destabilisation. Currently, the economy of Vietnam is falling into the spiral of inflation - stimulus - inflation which remains unresolved to date, thus affecting the sustainability of economic growth.

 

“At present, Vietnam has not figured out the costs for negative economic aspects because the Vietnam’s economy was growing steadily for a period of time and then had to resist and paid for this resistance,” said Associate Professor Tran Dinh Thien, Director of Vietnam Economic Research Institute. In the 2008-2009 period when the Vietnam altered its macro policies and stability but it, in reality, still ran after the growth target. This, of course, cannot create macro stability as expected. Although the economy may have high growth target, it is not a direct target.

 

According to Dr Vu Dinh Anh, Deputy Director of Institute of Pricing Science and Research under the Ministry of Finance, Vietnam basically lacks perspective and vision. Regarding fiscal policy, Vietnam needs to narrow its budget deficit by reducing spending and cutting off ineffective projects. We should not let the unbalance at sustainable level but bring it to the balance level. With respect to monetary policy, according to Mr Anh, the State Bank of Vietnam should not eliminate the ceiling interest rate regime because of difficulties it causes to banking system operation or should not devalue the local currency,” said Dr. Anh.

 

Associate Professor Tran Dinh Thien also said, regarding policymaking, Vietnam has only a short vision for a long-term scope. Within 24 years of doi moi (renovation), the economy begins slowing down and reveals serious structural weaknesses after every 10 years of continuous development. Then, the global economic crisis spread and affected all countries and Vietnam only focused on resisting the crisis while forgetting internal weaknesses of the economy.

 

According to economic experts, in 2010, the Vietnam’s economy will be progressing but Vietnam still does not place the growth on top of priority but dealing with inflationary problems and macroeconomic balance. Associate Professor and Doctor Tran Dinh Thien said Vietnam needs to pay attention to the exchange rate between the US dollar and the Chinese yuan, which is considered one of the instability points of the world economy in 2010.

 

In the past decade, the world economy had fundamental changes and was sometimes overheated, causing a shorter frequency of economic crisis compared with 10 years earlier. Luckily, the resistance measures to the health of the economy have become more effective.

 

Dr Vo Tri Thanh, Deputy Director of Central Institute for Economic Management (CIEM), said: Vietnam is not quick at predicting and coping with economic crises. Although we have achieved significant growth progresses, it is crucially important to review and reconsider the Vietnam’s concept of growth. More specifically, as high growth as possible was the top priority previously but the growth administration is now placed higher.

 

Dr Vo Tri Thanh said: “Doi moi (renovation) is essential for an economy but we do not need to hurry up to avoid derailing.” He said that the most difficulty lies in two points. One is very basic awareness and we tend to like new things although those things are not surely right. The other is the recognition of very basic foundations and we do not have a really good foundation while we want to renovate.