Confidence is the name of the game

The macroeconomic index has become better from quarter to quarter. Did this entail more confidence from businesses, investors and local people in macroeconomic management policies?

GDP expanded 4 per cent in the first quarter, surging to 4.66 per cent in the second quarter and then 5.35 per cent in the third quarter. Banks’ lending rates fell 5-8 per cent against the end of 2011. Albeit September’s consumer price index (CPI) spiked, it is likely that full-year CPI growth will be reined in between 8-9 per cent as projected. A declining trade deficit as we eyed a $34 million trade surplus in the first nine months has contributed to stabilising the exchange rate and hiking foreign currency reserves.

The general economic landscape seems to be positive at a glimpse. However, there persist drawbacks. Thereby, the confidence of businesses, people and investors into macroeconomic management policies has yet to be improved.

Is that too tough a comment?

No. That is because competent state agencies have neither pointed out weaknesses of the economy nor presented effective remedies to radically tackle them.

The GDP growing from quarter to quarter is not a special phenomenon this year as was the case for many years. Inflation was basically under control in the first eight months, but it escalated in September, triggering concerns over a possible comeback of inflation. This concern is not groundless since we have dealt with inflation in a passive manner, therefore when some factors affect aggregate demand, inflation immediately raises its ugly head.

Falling imports came on the back of sinking investment and production demands, particularly from domestic economic sector and this will hurt GDP growth. Bank rates fell, but firms found it hard to get loans seen in merely 2.52 per cent credit expansion against 5.13 per cent inflation rate, meaning the capital sources for the economy could not be properly addressed albeit bank rates fall further.

Assuming that the score ladder of businesses’ confidence into macroeconomic management policies is 100, what is current confidence rate, in your view?

Explicit surveys are needed to deliver objective scoring. I have not made any concrete survey. However, through communicating with people, businesses and investors I found they had concerns over policies on ensuring macroeconomic stability, market development and production-business support.

The Vietnam Financial Information Services Company’s just released business confidence index (BCI) for 2012’s third quarter after surveying 110 businesses from assorted economic sectors leading the country in brand valuation, asset and revenue figures and number of labourers. The third quarter BCI fell 13 points to 107 against the second quarter.

How can confidence be regained?

We should not over-emphasis GDP growth in 2013. More importantly, we must strive to put macroeconomy on an even keel and secure the confidence of people, businesses and investor community. There needs to be concrete measures to help businesses orient investment and work on long-term production and trading plans.

Issues like banks’ bad debt and unhealthy competition among banks to lure depositors must be shortly and radically settled to cultivate confidence.