Hedging bets amid an uncertain economy

The Ministry of Planning and Investment has introduced two scenarios relative to five-year social and economic development draft plan 2011-2015 based on local and world economy new factors and growth forecasts.

In the first scenario, development targets remain unchanged compared to those set in the 11th Party Congress Resolution, with general objectives of ‘developing the economy on a fast and sustainable manner’ with an average gross domestic product (GDP) growth rate of 7-7.5 per cent.

In the second scenario, the general objectives are being revised to ‘granting priority to macroeconomic stability, developing the economy in a sustainable manner with a suitable level of growth’.

In respect to concrete economic indices, the ministry (MPI) proposed lowering the GDP growth to 6.5-7 per cent per year and total investment as a proportion of the GDP from 40 per cent to 37-38 per cent. Meanwhile, it hiked export value growth from 12 to 13 per cent

The MPI forecast Vietnam’s GDP growth would hover around 6 per cent in 2011 and slightly augment to 6.5 per cent in 2012. If the GDP growth in the first two years of five-year plan was lower than projected Vietnam could hardly achieve the proposed 7-7.5 per cent annual GDP growth set for the period, therefore the MPI decided to downwardly revise the GDP growth target to just 6.5-7 per cent.

Relative to the second scenario, former MPI Minister Bui Xuan Gia assumed this would be a proper step.

“An adequate approach in appraising 2011 macroeconomic conditions as well as 2012 growth perspective is important to revise the 2011-2015 plan in an appropriate manner,” said Gia. 

Gia said current high inflation must be eliminated to effectively tackle the five year development plan.

“Short-term solutions can remove the fever, but not cure the illness. To curb a disease, we need to treat the issue radically,” Gia added.

Gia assumed in current context it was crucial to reign in inflation and consider it a precondition for implementing the 2011-2015 development plan.

However, economists warn lowering growth targets would entail negative consequences in terms of employment, social security and heighten the danger of Vietnam lagging behind other countries.