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Get tough on economy: experts

Update: January, 10/2012 - 09:40

 

Workers of TS Limited Company in Ha Noi produce motorbike components. The company plans to earn more than US$7 million and provide stable jobs for more than 200 workers. — VNA/VNS Huy Hung
HA NOI — A Vietnamese financial expert yesterday predicted an economically gloomier year for 2012 as the recession bottomed out.

"Stronger measures must be taken to restructure the economy," director of the Viet Nam Institute of Economics, Tran Dinh Thien, told a conference held by the National Financial Supervisory Committee.

"The world is on eve of a financial crisis and this has revealed the instabilities of Viet Nam in the global economy. It will be a very hard year for Viet Nam and the recession will reach its bottom."

Thien said the nation entered the year with a more fragile economic base following the economic downtrend, high inflation and the trade and State budget deficits that took root many years ago.

He added that stagnation combined with high inflation posed a great danger to the economy that worried economists about a trade-off between growth and stability.

If the Government prioritised curbing inflation, economic stagnation would grow worse, and if focus was put on curing economic stagnation, inflation would continue climbing up and be out of control.

Thien said the best scenario for this year's economic development, in which it was hoped GDP growth would reach 6 per cent, would be if the world economy grew by about 4 per cent and there was an increase of about 8 per cent in private investment.

But the 6 per cent GDP growth, the goal set by the National Assembly, would be far from reach, said the director of the Viet Nam Centre for Economic and Policy, Nguyen Duc Thanh.

Thanh said that he did not expect any economic recovery this year.

Although the goal of curbing inflation from more than 22 per cent to below 10 per cent could be achieved, the interest rate would remain high and enterprises would continue undergoing a stormy time for, at least, the first six months of the year, he added.

According to deputy director of the National Financial Supervisory Commission, Le Xuan Nghia, bank liquidity was the biggest headache that had to be solved this year for the survival of the economy.

He said the banking system had been weakened by rising bad debts, overdue debts and soaring potential risks in liquidity after several years of rapid growth.

If bank liquidity was not improved, the interest rate would not be lowered, the real estate and stock market would stay frozen and bad debts unresolved. This would mean the restructuring of the economy had failed.

"It is time to take strong measures to raise bank liquidity before things get out of control," Nghia said.

However, he added that it was questionable if 12 months was long enough to lower loan interest rates or to remove the ceiling interest rate - or to stabilise the gold price.

Meanwhile director of the Viet Nam Institute of Economics Vu Viet Ngoan said that the ceiling loan interest rate must be reduced by 4-5 per cent this year to help the nation overcome its difficulties.

Other financial commentators said that to improve the situation, the Government should continue to tighten fiscal and financial policies while enhancing the restructuring of public investment, the banking system and the State-owned enterprise sector.

Meanwhile, Thanh said the restructuring of the economy would take a long time and be costly, and required strong steps to "purify" the system of State-owned enterprises. A representative from Lien Viet Bank said even bankruptcy must be accepted for long-term development.

According to Thien, salary reform in the State sector was necessary, adding that curbing inflation should only be the short-term goal and the GDP growth rate should be set at less than 5 per cent instead of 6 per cent.

During the past four year, the economy of Viet Nam has been on a downtrend as macro-economic instabilities increased.

Average inflation in the period was 14.4 per cent, fluctuating from 6.9 per cent to 23 per cent.

The average GDP growth rate also witnessed a decrease from 8 per cent in 2002-07 to 6 per cent. — VNS

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