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On the Vietnamese economy: Taking the bad with the good
[Editor's note: This story was provided by our editorial partner VietNamNet]
VietNamNet Bridge — Now that Vietnam has joined the World Trade Organization, its economy is more integrated with the rest of the world and, in turn, has been affected by the current global financial crisis.
In recent months, several thousand workers have lost their jobs while the unemployment rate jumped from 4.64 percent in 2007 to 5.52 percent in 2008.
Additionally, a huge number of laborers working abroad are expected to return earlier than planned, putting pressure on the economy and society. In 2009, the government has a target of 1.7 million new jobs, a difficult goal during a recession.
In 2008, the gross domestic product grew 6.23 percent, 2.25 percent lower than the target. This year, GDP growth is set at 6.5 percent, but many experts say that only 5 percent growth will be reached. The consumption, investment and efficiency rates could be much lower than those in 2008.
Economic experts also predict that inflation could fall from more than 19 percent last year to only 5 percent in 2009 due to income reduction, a decline in consumption, cheaper prices for global commodities and the flood of Chinese goods in the local market. That is a positive sign, but experts warn the government should take action to prevent deflation.
In 2008, Vietnamese exports increased year-on-year by nearly 30 percent, but in August the rate began falling. In 2009, export growth is expected to be 13 percent, the lowest level since 2003.
But it will be hard to reach the target due to a reduction in import prices and competition from other Asian exports. Last year’s high trade deficit of $17 billion is expected to remain at the same level in 2009.
In addition, Vietnam will face a shortage of foreign currency as remittances, indirect foreign investment and turnover from foreign tourists fall.
The year will indeed be a difficult one as the government tries to maintain GDP growth, keep inflation at 5 percent, create more jobs, cut the trade deficit and increase exports.
To prepare for the new year’s export growth target of 13 percent, or $72 billion, the Ministry of Industry and Trade has suggested that the government provide more loans at preferential interest rates for export enterprises.
Banks have been asked to grant more capital and simplify procedures by accepting entrepreneurs’ commodities as mortgages. Other measures could be a credit guarantee service from banks for some key export commodities such as rice and agricultural products.
The ministry has named additional goods allowed to receive lower-interest loans, including rice, footwear, plastics, bicycles and accessories, rubber, machinery, steel and iron, construction materials, handbags, suitcases, umbrellas, garments and textiles.
Additionally, import taxes for several raw materials for export production will fall and, as a result, products will be cheaper and more competitive. Some export taxes will also be eliminated.
Increasing promotion of exports will be another long-term measure. With the global economic recession, trade promotion will focus directly on export commodities and contracts.
Large, traditional and new markets will still be the focus of both the government and enterprises, but more attention will be paid to the most important segments.
The ministry has also warned all export enterprises to be careful about their export contracts. Enterprises should check the financial abilities of their partners through Vietnamese commercial offices abroad to avoid risky payments, they said.