Vietnam’s economy continues recovery trend: NFSC official
Friday, 2015-01-02 11:02:47
NDO – Amidst difficulties, most important economic indicators the National Assembly set for the Government have been achieved and even surpassed the targeted plans, thanks to joint efforts by the Government and related ministries, agencies, and localities at all levels.
The statement was made by Deputy Chairman Ha Huy Tuan of the National Financial Supervisory Commission (NFSC) during an interview with Nhan Dan newspaper on Vietnam’s economic picture in 2014.
Q: After two years of missing the GDP target, in 2014, the GDP growth rate exceeded the set goal of reaching 5.98%. How do you evaluate about the figure and what is the motivation for economic growth in 2014?
A: In general, all the indicators including GDP growth rate, reflect a relative truthful picture of the nation’s economic situation in 2014. Besides the GDP growth target, others indicators such as imports-exports, trade surplus, credit growth, and budget implementation also exceeded the projected plans, offering an opportunity to reduce budget deficit.
In addition, the business community, the cornerstone of the economy, achieved significant results. The confidence of consumers and businesses has also showed many positive signs. Thus, according to the NFSC, the 5.98% of GDP growth is a pretty solid indicator, resulting from all above achieved or exceeded indicators.
Regarding the motivation to create economic growth momentum in 2014, there are four main drivers. Firstly, the economic restructuring and growth model transformation process begins to take effect on both efficiency and productivity of the economy. The clearest evidence for that lies in the restructuring of public investment and restructuring of credit institution system. Secondly, macroeconomic stability is maintained, supporting aggregate demand, increasing purchasing power and lowering interest rates. Thirdly, production is supported by decreased input costs due to a decline in world commodity prices, especially a sharp decrease in the price of crude oil, in combination with efforts to reform administrative procedures, particularly in taxation and customs according to the Directive No. 24/CT-TTg of the Prime Minister. Fourthly, the world economy’s recovery from difficulties and uncertainty still remains incomplete but has partially revived export markets for Vietnam.
Loose monetary policies in many countries have created favourable conditions for investment flows with low interest rates to pour directly or indirectly into Vietnam. In addition, the shift of foreign investment from China to Southeast Asia and Vietnam emerges as an attractive destination due to low production costs, an abundant labour force and political stability.
Q: In addition to the above achievements, inflation is under control at the lowest level in more than ten years. Financial-monetary markets are kept in line with the stable banking system’s liquidity, interbank interest rates, exchange rates, along with a balance of payments surplus. So, is it possible to say that macroeconomy in 2014 is stable? For inflation, should there be any worry about the low inflation rate?
A: As I said before, according to the NFSC, the nation’s macroeconomic stability has been maintained steadily in 2014.
Core inflation has decreased since the beginning of the year and seemed to stabilise in the last months. The consumer price index over the same period has fallen continuously since July due to the impact of fuel price reductions. Production and trading activities saw positive changes, helping improve revenue for State collection and reduce budget deficit. Monetary-banking markets have been stabilised, with interest rates on loans for economic organisations and individuals continuing its downward trend, currently at its lowest level compared with many years. A stable exchange rate was also maintained. Risks for credit institutions have been mitigated due to abundant liquidity.
Regarding inflation, if considering the objectives set out from the beginning of 2014, the inflation target has been exceeded. This is a positive result as low CPI rate during the remaining months is considered reasonable, although according to the NFSC, the demand of the economy needs to be strengthened further in the future.
Q: In 2015, the GDP growth target is set at 6.2% while inflation should be at about 5%. So, what are the challenges for reaching these goals and what are the solutions to create breakthroughs in the next year?
A: Challenges for 2015 are still handling the gaps that we have discussed. The first is facilitating economic restructuring, in which it is necessary to identify what the new growth model should be. The second is handling bad debts. The third is promoting participation of private sector. The fourth is the challenge of falling oil prices in the context of increasing need for public investment.
2014 has created a good premise for 2015, as indicators of socio-economic development have been completed. Many new legal frameworks have been built including Investment Law (amended), Business Law (amended), Housing Law (amended) and a number of newly-issued fiscal and currency policies. A series of agreements to be signed, or about to be put up for negotiations and more likely to be finalised in 2015 such as AEC and TPP would create both opportunities and challenges. And last but not least, as 2015 is the last year in the implementing of the five-year socio-economic development plan for the 2011-2015 period, I believe that authorities at all levels should pay more efforts and strong determination to completing the plan right from the beginning of the year. The determination of the whole political system will be spread to all sectors of the economy.
For creating innovative solutions in 2015, it is necessary to create confidence and higher motivation for businesses in implementing their production and business development plans. Besides, it should be considered to the green economy issues, sustainable development and environmental protection, particularly in the context of falling oil prices.