Vietnam - Q1 sees positive changes despite slow growth

Though the GDP growth rate slowed to 4 percent in the first quarter, there were a few good signs, the Ministry of Planning and Investment said at a meeting in Hanoi.

The rate of 4 percent is low compared to 5.57 percent of the same period last year and 6.1 percent of last year’s fourth quarter, the ministry said.

The Index of Industrial Production (IIP) picked up a mere 4.1 percent year-on-year, which is the lowest level in many years.

Multiple processing industries such as textile, garment, leather-shoe, chemical fertilizer, cement and steel recorded a drop in their indices.

Economic expert Le Dang Doanh ascribed the poor growth in the nation’s IIP to shrinking purchasing power, reflected in the consumer price index (CPI) of the early months, as well as the high inventories of cement, steel, furniture, fertilizer, apparel, beer and wine.

In the first quarter, trade deficit was only US$251 million, or 1.02 percent of export turnover. Meanwhile, CPI inched up a slight 0.16 percent in March compared to the preceding month.

Fuel imports fell by 32.1 percent year-on-year, while imports of fertilizer, machinery and fabric declined 27.4 percent, 1.4 percent and 11.1 percent respectively.

According to Bui Ha, head of the Department for National Economic Issues under the ministry, processing industries and consumption were experiencing tough times.

Enterprises had to scale down manufacturing, investment, imports of machinery and production materials and this caused stagnation in domestic production investment.

According to the ministry, the low CPI increase due to high inventories resulted in price discounts, dwindling incomes and a higher rate of unemployment, all of which led to a drop in total solvent demand and a sluggish growth in retail sales.

Though exports reached $24.5 billion in the first quarter, the outlook for export in the coming months is unpromising as most leather-footwear and clothing enterprises have run out of orders, said a representative of the Ministry of Industry and Trade.

Only a few of the major industry players have orders to export in the second quarter, said a representative of the trade ministry.

Sales of electronic and cooling appliances have plummeted, while cement and steel consumptions are suffering from the frozen property market, said the representative.

The representative of Electricity of Vietnam (EVN) said power output reached 26,500 kWh in the first quarter, increasing by 10.3 percent compared to the same period last year.

However, the fact that EVN hasn’t experienced any critical power shortage suggests that the manufacturing sectors are in trouble, said Deputy Minister of Investment and Planning Nguyen Van Trung.

Lam Nguyen Khoi, deputy director of the HCMC planning department, cited data of the General Department of Taxation which showed that 931 city-based enterprises had closed their tax codes for dissolution in the first quarter.

More than 5,000 enterprises have notified the tax department of their business suspension.

According to a report of the planning ministry which was previously submitted to the Government, over 2,200 enterprises went through procedures of disbandment and 9,700 others registered for operation suspension in the early months of 2012.

The number of dissolved and suspended businesses was thus 6 percent higher than the same period last year and the number of enterprises which have completed procedures for dissolution increased by 57 percent.

Meanwhile, as of March 21, the number of new enterprises fell by 8 percent and registered capital saw a year-on-year drop of 12 percent.

However, the macro-economic situation also showed positive signs this March, after the very bad performance in January and February, Bui Ha said.

The first quarter’s exports continued to grow, rising by 23.6 percent compared to the same period last year.

The State budget revenue reached VND137 trillion as of March 15, equal to 19 percent of the whole year’s estimate.

Stable Forex rates, lower interest rates in the monetary market, and other indicators such as inflation, trade and budget deficits show that the overall economic situation is becoming more stable, Ha said.

Similar to other economic reports, the report of the Ministry of Planning and Investment concluded that there were positive changes in the first three months of 2012.

All sectors recorded certain developments, and the State budget revenue saw good results.

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