CIEM: Outlook dims as economists see slower growth

Speaking at a recent seminar on the country’s growth prospects for 2016 held by the CEO Club Ho Chi Minh City, CIEM President PhD Nguyen Dinh Cung said the nation is looking at growth of 6.5% this year.

“The growth in 2015 as well as the prior two years has largely been underpinned by expansion of the mining industry— and the current level of extraction of oil and coal from the ground isn’t sustainable over the long term,” said Dr Cung.

“In addition, this past September the manufacturing Purchasing Managers’ Index (PMI) fell below the 50-point threshold, to 49.5, for the first time in two years, a strong foreshadowing production is slowing down.”

The senior economist stressed that the agriculture industry along with the nation’s farmers have encountered a myriad of difficulties this year, most of which stem from the small scale farming methods utilized.

Until the agriculture industry makes the transition to large scale production methods and modernizes its machinery and equipment as well as technologies it will continue to drag the overall economic growth of the nation downwards.

“The garment and textile industries are also getting bogged down by an overreliance on imported raw materials,” said Cung, which contributes to an ever widening trade imbalance with the nation’s trading partners.

He said the overall trade shortfall in the nine months leading up to October of 2015 was a whopping US$4.03 billion. Most notably China continued to be the biggest source of foreign goods, accounting for nearly 30% of total imports.

Cung also expressed discontent over fiscal and budgetary policy.

“The budget deficit has mushroomed and public debt has expanded exponentially over the past several years, which will wreak havoc on both economic stability and long-term growth if remedial measures are not promptly put in place.”

Absent some unforeseeable event or series of events the economists at CIEM are forecasting the economy in 2016 to look very similar to that of 2015 said Cung and any hopes for a breakthrough remain bleak.

In other words, don’t hold your breath for faster growth.

Chief Representative Hirotaka Yasuzumi of the Japan External Trade Organization in Ho Chi Minh City in turn spoke about the state of health of small businesses throughout the nation saying they are on life support and in very “serious condition”.

“Liquidity and having sufficient working capital is the number one problem small businesses face but only 30% of them have ready access to bank loans to acquire the badly needed funds,” the Chief Representative accentuated.

He said the government could jump start the economy by providing government-backed small business loans at low interest rates to the nation’s small businesses thereby alleviating the risk of non-payment to banks.

“The government should also devise better programs for workforce development and adult education programs along with on the job training programs to support small businesses in their efforts to modernize,” said Yasuzumi.

Citing statistics of the finance ministry, he said the number of businesses in the country shrunk by 8.7% year-on-year in the first nine months of this year.