Vietnamese economy has yet to recover from difficulties

In the first six months of the year, gross domestic product was estimated to have grown by 5.18% over the same period last year, which was more than the 4.93% growth in 2012 and the 4.9% growth in 2013. In terms of quarterly growth, the economy also posted greater expansion in the April-June quarter compared with the previous three months. In addition to GDP growth, other bright spots of the economic picture were low inflation, strong exports and a manufacturing recovery.

In June, consumer prices rose by only 1.38% against the end of 2013, suggesting that inflation had been brought under control. According to the General Statistics Office, Vietnam's inflation should shake out to 5% in 2014, less than the National Assembly target of 7%, barring any abnormal developments. During the first six months of the year, the country recorded a trade surplus of US$1.3 billion, helped by a 14.9% year-on-year increase in export revenue and slower import growth. Budget revenue and spending followed closely with the plan. Total social investment in the January-June period also rose by 8.2% from a year earlier. Industrial production, one of the largest contributors to economic growth, expanded by 5.8%, more than the 5.3% rate in 2013. It can be seen that significant progress has been achieved towards the goal of macroeconomic stability.

However, these encouraging signs are not enough to conclude that the Vietnamese economy has completely escaped from its woes. A closer look reveals that slow CPI expansion is an indication of weak demand. Credit to the economy rose by only 2.02% while retail sales also increased by a modest 5.7%. As domestic demand has not improved, the manufacturing sector continues to face a standstill. Manufacturing's inventory index rose to 12.8% in June 2014, significantly higher than the 9.7% seen in the same month in 2013.

Bottlenecks in sales of manufactured goods made the business picture look still bleaker. So far, more than 33,000 struggling companies have been forced to dissolve or halt their operations, a rise of 16.3% compared with a year ago. The number of enterprises resuming business also dropped by 10.7% year on year.

Trade surplus in the first half of the year is a good sign, but unfortunately it was primarily driven by the foreign-invested sector while domestic enterprises continued to register a deficit.

It can be seen that the economy is undergoing positive changes but in order to keep it going, the Government needs to continue a range of synchronous measures aimed at removing bottlenecks to growth by bolstering demand, finding new export markets and reducing bad debt.

(Source: Nhandan Online)