Challenges and opportunities for Vietnam in 2012

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Jan 9th, 2012

Tuan Nguyen, ANT Consulting

In the year 2012, Vietnam government will continue to apply tight and flexible monetary policy, and tighten its fiscal policy to contain inflation. The workshop on “economic scenario in 2012: What an opportunity” to be held by Vietnam Economic Times took place in Ho Chi Minh City in Dec 2012 also shared that view and further provided with a scenario for the Vietnam economy in 2012.

Mr Truong Dinh Tuyen, a member of National advisory council noted that economic growth is still considered important however, reducing investment easily lead to reduced growth, unless the flow of capital is directed into the private sector and areas with high ripple effect. Also, it will be very difficult to achieve GDP growth of 6% in 2012 if we do not adjust investment structure, loan structure for small and medium enterprises (SME), and export sectors. SMEs and the export sector are area of high growth in recent years.
The challenge for business in 2012 will be (i) The world economy is more volatile which enterprises must actively prepare to deal with; (ii) Oil and food prices; (iv) Interest rates remain high, and pressure of VND losing value against USD; (v) Vietnam to implement restructuring the economy, so in the first phase, it will affect the business operation; (vi) The stock market, real estate market is not likely to recover quickly which will impact the building materials industry and related industries.

However, there are opportunities for Vietnam enterprises in 2012. Inflation would decline then interest rates will reduce. Vietnam still has many opportunities because it exports essential commodities (agriculture, fisheries, textiles and footwear). The export rate increase highest in 2011 compared with previous years (increased more than 30%). In the meantime, production of Thailand remains difficult due to serious consequences of flooding therefore similar products of Vietnam will likely increase especially the first 6 months. Exports to East Asian markets (China, Japan, and Korea) would increase.

In 2012, curbing food and oil prices are a challenging task to curb inflation because it will increase domestic prices. If Vietnam is to achieve inflation target of 9% in 2012, interest rates will be approximately 11% per year. With this amount, interest rate of about 13-15% per year which is still tough for business, but better than in 2011.

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