Vietnam Economy still fragile: report

by lexie Tue Sep 13, 2011 12:10 pm

September 13, 2011

Economy still fragile: report

The worst is over for Vietnam’s economy but the macroeconomic situation remains fragile, warned the National Financial Supervisory Commission in its latest report.

The commission said while the country’s growth rate could reach 5.8%, the consumer price index is forecast at as high as 19% this year. Last year, the report says, Vietnam’s growth was 6.5% and CPI 9%.

Le Xuan Nghia, deputy director of the comission, said in the report that although the exchange rate had been stable so far, it remained volatile, with strong fluctuations expected by the end of the year.

The total amount of bad debts was about VND75 trillion by June, and the non-performing loan ratio had risen from 2.16% in end-2010 to 3.1% in June and continued to increase.

Nghia warned that a rise in bad debts and liquidity shock in small banks would be the key factors challenging Vietnam’s economy in the next 18 months.

Meanwhile, according to the World Bank’s latest report, the vulnerability of the banking system arises from several sources including rapid credit growth (35% on average during the past three years) and high credit to GDP ratio (125%). Other factors include doubtful portfolio quality exposure to weak State-owned enterprises (SOE) and lending to depressed real estate and securities markets.

The global lender’s report, delivered at a meeting on Tuesday between the Government and international donors, showed that Vietnam’s inflation rate reached 23% year-on-year in August, the highest in Asia.

Currency movement has been highly volatile during the past four years having remained stable until 2007. Vietnam dong is the only Asian currency to be depreciating against the U.S. dollar.

Meanwhile, the country’s foreign reserves ensured only eight weeks of import cover, the lowest since 1994, while almost all countries in Asia have seen an increase in reserves.

In addition, Vietnam’s external debt stood at 42% of GDP, the highest since 1998. It was higher compared with 28% of Indonesia, 33% of Malaysia, 32% of the Philippines, 29% of Thailand and 30% of Cambodia.

Capital flight was estimated up to US$25 billion – a record in Vietnam’s history, according to the World Bank.

http://www.vietfinancenews.com/2011/09/economy-still-fragile-report.html