Vietnam - Mixed information makes it difficult to give predictions for 2012

by lexie Wed Nov 30, 2011 4:11 pm

November 30, 2011

Mixed information makes it difficult to give predictions for 2012

The basic economic indicators of Vietnam are much worse than that of other economies, though Vietnam and the other economies are in the same international context. The difficulties which exist in 2011 would repeat in 2012, and they would be even worse, economists have warned.

High inflation

Tran Dinh Thien, Head of the Vietnam Economics Institute, said at the workshop on the prospect of Vietnam’s economy in 2012 held in HCM City several days ago that the economic growth slowdown, high inflation rate, big trade deficit and budget deficit are the “heritages” left by the year 2011 for 2012.

Thien said that the situation has been lasting for many years, which has caused the “spiral of stagnancy”-- heavy investment has been made, the growth rate has slowed down, while the inflation rate has increased.

Commenting about the Ministry of Planning and Investment’s forecasting that the GDP would grow by 6 percent in 2012, and the inflation rate would be lower than 10 percent, Thien said that the factors that support the high GDP growth in 2012 prove to be weaker than the previous years.

The report on Vietnam’s economic activities and the prospect in 2011-2012, released by Standard Chartered Bank recently also pointed out that in 2012 the government of Vietnam will have to face the same challenges like in previous years – the pressure on the dong value, the requirement to control the credit growth. The challenges may become even more serious due to the difficulties of the global economy and the fluctuations in exports.

The institution has predicted that the real GDP of Vietnam would increase by 6.3 percent in 2012 and 6.5 percent in 2013. Meanwhile, the inflation rate is thought to decrease to 19.7 percent in December and to one-digit rate by the end of the second quarter of 2012. It is expected that the inflation rate would be 11.3 percent in the whole year 2012 and 8 percent in 2013.

Standard Chartered Bank thinks that the inflation rate would return to the one-digit level by the end of the second quarter of 2012. However, the inflation decreasing would be not enough for Vietnam to loosen the monetary policies in the time to come, because the pressure on the dong value still exists.

The bank still believes that the dong may continue losing its value in 2012 because of the current account deficit and the low foreign currency reserves.

In a recent research on Vietnam’s economy, ANZ predicted that the inflation rate in Vietnam may reach 18-19 percent this year.

ANZ believes that the inflation rate would be at two-digit level by the end of the year, which means that the high inflation would remain the main challenge for Vietnam in the next 12 months.

ANZ’s Chief Economist of Asia Pacific said at a workshop in HCM City last week that the key interest rates would be maintained at the current levels until the first half of 2012, and that the interest rates would only be eased when the inflation rate decreases to one-digit level.

He went on to say that Vietnam needs to anticipate the risks if it loosens the monetary policies too soon. ANZ predicted that the refinancing interest rate would be 13.3 percent by the end of 2011, 12.5 percent in 2012, while the consumer price index CPI would increase by 18.7 percent in 2011 and 13.8 percent by the end of 2012.

Talking about what Vietnam should do in 2012, Thien said that the government should prioritize to ease the inflation, while it should not pay too much attention to obtain high GDP, adding that the targeted GDP growth rates should be 3-4 percent, or 5 percent at maximum.

http://www.vietfinancenews.com/2011/11/mixed-information-makes-it-difficult-to.html#more