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Conference examines measures to counter plunging oil prices

Update: February, 07/2015 - 10:26
How the changes of world oil prices affect Viet Nam's economy is a hot topic for local economic experts. – Photo nationofchange.org
HA NOI (VNS)  — Experts suggested policies that the Government can implement in response to plunging oil prices at a conference organized by the National Centre for Socio-Economic Information and Forecast yesterday.

A report about the prospect of oil prices in the medium term and scenarios of their impact on Viet Nam's economy shows that in case there is no oil price shock, the country's gross domestic product (GDP) growth rate this year is expected to be 5.5 per cent, the inflation rate 2.7 per cent and foreign exchange (forex) reserves will be US$37 billion.

The report raises three scenarios in which global oil prices could fall to $50 per barrel, $40 per barrel and $30 per barrel this year.

According to Luong Van Khoi, the head of the centre's World Economy Department, in all three scenarios, GDP growth rate, exports and imports would jump, while inflation, tax collection and forex reserves would decline.

Specifically, if the oil price is $50 per barrel, GDP growth rate will grow by 0.48 percentage points, exports by 2.9 per cent and imports by 1.83 percentage points, while inflation will slip by 1.83 percentage points, tax collection by VND6.65 trillion ($312.2 million) and forex reserves by VND1.04 billion ($48,800), in comparison to the figures anticipated in case no oil price shock occurs.

If oil prices plunge to $30 per barrel, GDP growth rate will rise by 0.75 percentage points, exports by 4.01 percentage points, imports by 2.48 percentage points, and inflation will drop by 1.07 percentage points. Tax collection and forex reserves will slide by VND8.66 trillion and VND1.45 billion, respectively, the report stated.

Based on the analysis, the report's researchers recommended further interest rate cuts to boost GDP growth rate and value added tax increases to compensate for losses in tax collection.

In the medium and long term, the Government should implement policies to encourage domestic investments, boost support for industry development and attract foreign direct investment, they added.

Experts at the work shop also pointed out that the falling oil prices had created opportunities for Viet Nam to hasten economic restructuring to achieve higher productivity, lower costs and target greater energy savings.

Oil prices have more than halved since June last year, due to the shale oil boom in the United States resulting in supply exceeding demand. Benchmark Brent crude futures were pegged at about $57.5 a barrel yesterday.

According to Le Viet Trung, Director of the Research Centre for Petroleum Economics and Management, oil prices will stay at below $60 per barrel this year due to considerable supply from the shale oil boom and on-going geopolitical crisis.

No rapid recovery in oil prices could be expected due to rising global inventories and a steady OPEC supply, experts said, adding that it was unlikely that oil prices would rebound to $100 per barrel in the two years ahead.

Last month, the Minister of Planning and Investment, Bui Quang Vinh said plunging oil prices had both positive and negative impact on Viet Nam's economy, which exported crude oil and imported a sizeable amount of finished products from oil. However, Vinh said the economy would largely benefit from the plunging oil prices. — VNS

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