Greater efforts needed to overcome challenges

In the face of price hikes and shrinking business and production operations, Vietnam has recorded certain socio-economic achievements over the past six months, generating approximately 720,000 jobs, meeting 45 percent of the yearly plan, maintaining steady industrial production growth and increasing export value by 30 percent over the same period last year.

In the meantime, the monetary policy has proved effective and successful in controlling the free foreign currency market to stabilize the VND and USD exchange rates.

In addition, interest rates have continued to follow a downward trend to provide impetus for businesses and investors. Other bright spots for economic growth include low credit growth and budget overspending which has dropped to below 5 percent of GDP.

Despite the Government’s efforts to lower the economic growth rate from 7 to 6 percent, the rate of inflation is predicted to reach 17 percent this year, double its set target.

The Head of the Statistics Department, Nguyen Duc Thang points out some outstanding problems arising from the high consumer price index (CPI) of 17-18 percent, natural disasters and a sharp increase in consumption power.

Apart from the above-mentioned elements, how to control inflation successfully depends on cutting public investment spending and reducing investment capital for projects.

In the past six months, VND80,550 billion was siphoned off from the State budget, accounting for 9 percent of total social investment capital for 2011. 

During the reviewed period, businesses were still subject to lending interest rates of 18 percent/year. If the rate of inflation remains high, banks will find it difficult to lower interest rates.

In the first half of the year, the trade deficit accounted for 17 percent of export value but it is likely to rise in the second half under the pressure of global price hikes and growing demands for commodities during the New Year Festival.

FDI is also a macro index of the national economy. In the past six months, US$5.3 billion in FDI was disbursed almost equal to last year’s figure while FDI attraction declined sharply to just a shade above the mark recorded in the same period last year.

It seems unrealistic to expect a new inflow of FDI into Vietnam in the next six months as Japan is managing to recover from the catastrophic earthquake and European nations are not out of the financial crisis.

Judging from the threat of runaway inflation, the General Statistics Office (GSO) predicts that the CPI may rise by 2.5-3.9 percent in the comming months and surpass 17 percent for the whole year.

The most challenging question now depends on how to implement six solutions in the Government’s Resolution 11 effectively.