News Room - Business/Economics

Posted on 25 Jun 2009

Impact of crisis on Vietnam will last a while (Vietnam)

Vietnam’s heavy reliance on export-based growth is likely to see the global crisis cast its shadow over the economy for longer than expected, leading economists say.

 

“The government’s policies to stimulate consumption have proved effective, but only partly so,” said Bui Nguyen Khanh, general director of the Ca Mau Seafood Company in the Mekong Delta’s Ca Mau Province.

 

Khanh said his company’s sales had so far this year dropped 40 percent year-on-year.

 

Businesses are still facing difficulties including capital flow, he said.

 

“Vietnam’s economy has shown some good signs, but there’s nothing to be sure about how things will change.”

 

Economist Le Dang Doanh said the chance for Vietnam’s economy to regain its momentum soon is “slim.”

 

“Things won’t be good this year, and might remain bad for the next several years.”

 

Doanh said there has been some recovery in real estate and stock markets, “yet the whole situation is uncertain, risks of inflation are very obvious, the trade deficit is high and there’s imbalanced development at the microeconomic level.”

 

As the export sector accounts for 72 percent of the country’s GDP and employs a large workforce, Doanh said that Vietnam “shouldn’t be too optimistic” because the world economy in general has not recovered.

 

Too much optimism will cause businesses to rush in to invest and when their products cannot be sold, the situation will be harder to cope with, he said.

 

Economist Pham Chi Lan said “there’s no firm clue to deduce that Vietnam’s economy will recover and grow quickly again.”

 

Lan said there’s been no data or figures that prove the effectiveness of the stimulus packages, such as how much money has been disbursed, where it has ended up, and how it has been used.

 

She said the unemployment rate, an important economic criterion, will only go down when the basic sectors of the economy such as export and industry are saved from the current crisis.

 

“Official figures about people losing jobs in Vietnam are not reliable,” she said.

 

More than 64,000 workers lost their jobs in the first quarter this year, mainly at businesses and industrial parks in large cities and towns like Hanoi, Ho Chi Minh City, Binh Duong, Dong Nai and Hai Phong, the government said. The unemployment figure was compiled using data from 48 cities and provinces.

 

The government estimates around 300,000 people nationwide will lose their jobs by the end of this year. The figure last year was 66,707, based on data from 41 localities, local online newspaper VietNamNet reported.

 

Nguyen Hai Nam, director of HCMC-based Li Ta Company that imports cloth and owns the Bolzano fashion brand, said his business has somehow benefited from the government’s stimulus packages but a recent increase in fuel, power and water prices “really worries me.”

 

Nam said the more expensive bills have pushed his production costs up a further 10 percent.

 

The International Monetary Fund (IMF) in March listed Vietnam among 26 countries that are “highly vulnerable” to the global financial crisis, Reuters reported.

 

The overall fiscal balance of developing countries is likely to deteriorate on average by 2.5 percentage points of GDP in 2009, the IMF said. Commodity exporters will be hardest hit, with a decline in fiscal positions of about 5 percentage points of GDP on average.

 

Speaking at a Hanoi conference Tuesday on prospects and problems for Vietnam’s economy in the 2009- 2010 period, professor Dang Xuan Thanh from the Institute of World Economics and Politics said foreign direct investment in Vietnam has dropped and can hardly improve in the near future.

 

Meanwhile foreign indirect investment has dwindled down to almost nothing and money sent home by overseas Vietnamese is also decreasing, Thanh told the conference co-organized by Dien Dan Doanh Nghiep (Business Forum) newspaper and the Vietnam Institute of Economics.

 

The World Bank said Tuesday it expected Vietnam’s GDP growth to decrease to 3.5 percent this year, down from 6.2 percent last year and the March forecast of 5.5 percent.

 

The Washington-based lender estimated average economic growth in developing countries at 1.2 percent this year.