Speaking at a the BizTALK seminar held by BizLIVE at FLC Samson Beach & Golf Resort, Thanh Hoa province, on December 12 , Huynh The Du, director of the Fulbright Economics Teaching Program, said that business conditions are ideal for companies operating in the country now.
Vietnam’s economic growth has remained high, inflation is low and consumer prices are stable. Moreover, its World Economic Forum (WEF) Global Competitive Index has reached an all-time high, he said.
The economist stressed that Vietnam’s GDP
per capita is about to hit $3,000, which is an important threshold that will lead to a boom in consumption, investment and infrastructure development.
Nguyen Anh Tuan, vice chairman of the Vietnam Association of Foreign-investment Enterprises (VAFIE), said that Vietnam’s FDP growth could reach 6.5%-6.6% this year, while inflation is projected at 1%, a decade low, facilitating reductions in interest rates.
However, speakers at the seminar took a deep look into shortcomings of the Vietnamese economy.
Mr. Du said that the two biggest problems that Vietnam is facing is (i) narrow access to credit and funding, and (ii) macroeconomic instability, which stems from troublesome public debt.
The country’s financial depth, or total outstanding loans to GDP, hovers around 100%, much higher than that in some other countries such as India and Indonesia.
In addition, Vietnam’s state budget spending has stayed equivalent to 30% of GDP over the past ten years while the indicator averages at 20% in other countries. Budget expenditures over GDP are worrisomely high in some localities.
“Vietnam does not fall short of [financial] resources. The ‘bottleneck’ lies at allocation of resources,” he added.
Economist Le Dang Doanh, former director of the Central Institute for Economic Management (CIEM), forecast Vietnam’s economy would expand 6.6%-6.62% this year, driven by the manufacturing sector and foreign-invested companies.
Domestic demand has improved considerably, evidenced by increasing car sales, the warming up of the real estate market.
However, the Vietnamese economy is facing two big troubles, which are high financial costs and fiscal imbalances, he noted.
To offset budget shortfalls, the government has had to borrow 30 trillion dong ($1.45 billion) from the State Bank of Vietnam, $1 billion from Vietcombank
, asked for parliament approval to issue $3 billion worth of bonds overseas, and will divest from 10 profitable companies, he reminded.