Vietnam - Nation’s economy enjoys optimistic start

The nation’s economy has seen good signs in the first two months of this year with the trade deficit being kept at 4.1 percent and the consumer price index staying at the lowest level over the past decade, creating a momentum to overcome future challenges.

The Ministry of Planning and Investment (MPI) said that after a contraction of nearly 13 percent in January due to the prolonged Tet (Lunar New Year) holiday, industrial production in February has regained its growth rate, up 10 percent over the previous month and 22.1 percent against the same period last year.

Exports in the first two months have also recorded an impressive growth at 24.8 percent, double that of imports, helping to tame the trade deficit at 4.1 percent, down from last year’s figure of 14.8 percent.

Although CPI in February increased by 1.37 percent over the previous month, CPI in the first two months rose only by 2.38 percent, nearly the lowest in comparison with that recorded in the same periods of the past decade, excluding the first two months of 2009.

The Domestic Market Management Team said that with measures to accelerate production to create an abundant source of goods, thus cooling down the price of essential products, March CPI is expected to increase by about 0.5 percent.

Sharing the optimistic outlook, Fitch Ratings also forecasts the Vietnamese economy will become stable, with both inflation and trade balance making headway, proving that Resolution No. 11 is effective.

However, the nation’s economy still has to face a wide range of challenges, including a huge volume of stockpiles, said the MPI.

Key export items suffer from price pressure and small and medium enterprises meet an array of difficulties in accessing credit.

The unsold inventory index (UII) of the processing and manufacturing industries rose by 17.4 percent year-on-year, with sectors seeing high UII including vegetable processing and preservation with 80.6 percent, fertiliser and nitrogen mix production, 71.9 percent, and iron and steel, 53.4 percent, respectively.

Rice exports are struggling with a shortage of orders as well as fierce competition in terms of price from other rice exporters. As a result, rice export revenue in the reviewed period dropped by 43 percent over the same period last year.

Coffee exports shrank by 17 percent and aquatic product exports faced difficulties in the market and payment ability as many European economies are facing turmoil.

Meanwhile, many producers and exporters still have to pay an interest rate of over 20 percent per year although many major commercial banks have announced a cut in interest rates.

Tran Thien Hai, President of the Vietnam Association of Seafood Exporters and Processors (VASEP), said the industry needs about 26 trillion VND to purchase materials, however, it’s hard for them to access loans due to the high interest rate.

On March 5, Nguyen Nam Hai, Deputy Ministry of Industry and Trade pointed out the need to continue implementing the Government’s Resolution 11 and tasks on business restructuring in order to boost production and maintain strong consumption.

The ministry asked producers to cut expenditure and consolidate distribution systems to ensure the lowest price of products for consumers.

To deal with difficulties facing agricultural product exports, especially rice, the country’s major export item, Phan Thi Dieu Ha, Deputy Head of the Import-Export Department under the Ministry of Industry and Trade, describes trade promotion programmes as a significant measure to clear up the market and increase exports while partnering with relevant agencies to map out appropriate measures for a temporary rice reserve to avoid a price drop.

The ministry has submitted measures to the Government to boost rice exports, which will be made public, to help enterprises overcome present difficulties, Ha said.

VNA

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