Cool heads guide economy

Prime Minister Nguyen Tan Dung

Prime Minister Nguyen Tan Dung told last week’s government cabinet that saving enterprises, boosting local production, consistently curbing inflation and stabilising the macro-economy were key tasks for the remainder of the year.

Dung said inflation this year would be 7-8 per cent and economic growth would be 5.2-5.7 per cent, lower than the initially set 6-6.5 per cent. “However, a clear path to accelerate disbursement of 2012’s planned state investment capital worth VND23 trillion ($1.1 billion) for each month of 2012’s second half is needed to reach these targets.”

The prime minister noted the credit growth for 2012 must be 10 per cent, which was “feasible”, not 12-13 per cent as proposed recently by the State Bank.

“Enterprises are in dire need of capital. The State Bank must order commercial banks to loosen borrowing conditions for enterprises. Then we will successfully realise our target of curbing inflation and stabilising the macro-economy this year,” Dung said.

The MPI reported that the consumer price index augmented month-on-month from 1 per cent in January, 1.37 in February, 0.16 per cent in March, 0.05 per cent in April, 0.18  per cent in May and -0.26 per cent in June.

The industrial production index (IPI) was recovering, with a rise from 3.9 per cent in this year’s first two months to 6.5 and 7.5 per cent in March and April, respectively, and to 6.8 and 8 per cent in May and June, respectively.

Meanwhile, the inventory had also gradually decreased, from 34.9 per cent in March to 32.1 and 29.4 per cent in April and May, respectively, and to 26 per cent in June.

Also in this year’s first half, there were over 26,300 enterprises dissolving or pausing operations, up 5.4 per cent on-year, but lower than 29,000 enterprises with such a plight in last year’s second half. Such enterprises were mainly found in big cities like Ho Chi Minh City (8,350 enterprises), Hanoi (6,500 enterprises), Haiphong (850 enterprises) and Danang (690 enterprises).

HSBC Vietnam Manufacturing Purchasing Managers’ Index™ (PMI™) report released last week said that June data pointed to a further worsening of business conditions across Vietnam’s manufacturing sector and the rate of deterioration accelerated to the fastest for four months.

“The continued slowdown of manufacturing activity suggests that businesses continue to face tough operating conditions in Vietnam. Demand is low both internally and externally,” said HSBC Asia economist Trinh Nguyen.

Nguyen said the State Bank lowered rates in the first half of the year by 400 basis points to spur spending in Vietnam. “This is likely to filter through in the second half, boosting economic activity.”

ANZ in a report named “Vietnam-policy focus shifts back to growth” released last week stated: “We expect growth to pick up gradually in the second half on recent monetary easing and higher government spending. We maintain our forecast that real GDP growth will increase to above 5 per cent year-on-year in the third quarter and above 6 per cent in the fourth quarter, with overall growth for 2012 at 5.5 per cent.”