News Room - Business/Economics

Posted on 28 Nov 2008

2009 economic scenario looks bleak

       

           

The global economy is expected to go through more difficulties next year and this will affect FDI flows into Vietnam as well as the country’s exports, Prime Minister Nguyen Tan Dung said at a meeting last Monday.

 

The global economy is estimated to grow at 2.2 percent next year from an anticipated 3.7 percent this year, according to the International Monetary Fund.

 

The US, Japan and European countries, Vietnam’s biggest importers, are expected to see an economic slowdown and reduced purchasing power, impacting Vietnamese exports.

 

But the Vietnamese government is reconciled to a slower pace of export growth of 13 percent next year. This year export revenues will rise 31.8 percent to US$64 billion, the Government Office forecasts.

 

Member of the National Monetary Advisory Council, Vo Dai Luoc, said, “In the context of deeper international integration, we should not make light of the current crisis.”

 

Many countries have decided to spend huge amounts of money to rescue their economies but Vietnam has not done so, he said, adding that the risk of deflation could also threaten the economy next year.

 

Deflation is dangerous to an economy because when prices are falling, consumers have an incentive to delay purchases until prices fall further, which in turn reduces overall economic activity, setting off a deflationary spiral.

 

Consumer prices are estimated to drop 0.76 percent this month on the back of lower fuel and food prices.

 

The year-on-year inflation growth slowed to 24.22 percent in November, according to the General Statistics Office (GSO). It was 26.72 percent in October.

 

However, the rate of inflation since the beginning of this year remains high at 23.25 percent, the GSO said.

 

Eighty percent of small and medium-sized enterprises, which account for 95 percent of firms in Vietnam, are having difficulty finding markets for their products due to the economic meltdown and lack funds to remain in operation as a result of the recent tight monetary policy, according to the Vietnam Association of Small-and Medium-Sized Enterprises.

 

Some experts said that the next few months could see some of them going bankrupt.

 

To overcome these challenges, the government should take comprehensive and long-term measures, experts said.

 

“We should take advantage of the lower prices of fuel and construction materials to develop infrastructure,” Luoc said.

 

He also suggested that exports should be boosted to regions less affected by the crisis, like the Middle East and Latin America.

 

The government targets economic growth of 6.5 percent next year against an anticipated 6.7 percent this year.