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Social & Economic Indicators of Vietnam Country |
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Quick rerferences
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Country Economy Outlook (May-2008). Brief from Vietnam Financial Review & Report of VN Government on Jun.2008 Since the beginning of the year, drastic measures have been taken to cool down consumer prices, including: curbing money supply, raising interest rates, and freezing energy and input prices. On the fiscal side, the government is cutting spending and reigning in budget funded investments, putting on hold projects deemed unnecessary and unproductive. The construction of government offices has been stopped. Government efforts to combat inflation have been tireless, but also futile. Inflation in April and since the beginning of the year has been the highest in 16 years. There is sign of a slow down in March and April, but the rate of deceleration is modest, suggesting upward pressure is still mounting. ADB’s inflation forecast for this year is an overwhelming 15.6 percent. As the price of oil rises across the world, domestic prices will continue to rise after the current freeze on the fuel price expires in June. Another surge in CPI in the second half of the year is imminent. But inflation is not the only problem. The worsening trade gap after the first quarter is causing the government headaches. The deficit in the first four months reached $11.4 billion, almost 50 percent of GDP – compared to $14.1 billion (20 percent GDP) for all of last year; which, notably, was the highest ever before. The situation is expected to worsen; the deficit might reach $20 – 30 billion while the country’s total foreign currency reserves currently stand at only $20 billion. The banking sector continues to be under enormous strain due to a lack of liquidity as the campaign against inflation wages on. Since the beginning of this year, as part of the effort to curb money supply, the State Bank of Vietnam (SBV) has raised commercial banks Capital Adequacy Ratio (CAR) from 10 percent to 11 percent and is requiring banks to purchase VND20.3 trillion of SBV certificates. As a result, nearly VND40 trillion in cash has been mobbed up pushing many commercial banks with bad cash flow into trouble. In March, the central bank called in VND52 trillion VND which it lent to state-owned commercial banks ten years ago (at 3 percent annual interest) – The move has pushed the whole system to the verge of a dire liquidity crisis. The interest rate ceiling at this time of high inflation results in a negative real interest rate an unwise policy as the central bank is trying to reduce the money supply. In the coming months, the SBV is expected to rigorously evaluate and revise its policy if the fight against inflation is to be won without friendly fire devastating the banking sector. As the fight against inflation continues, monetary tightening will continue, depleting fuels that feed share prices. The unfavorable economic conditions (runaway inflation, a worsening trade deficit, and the banking sector’s liquidity problems) means the market will not see brighter days anytime soon.
Social Economiec Indicator in first 9 months 2007 (+/-) in percentage year on year
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