Economy receives mixed bill of health

Economy receives mixed bill of health

While no dramatic economic breakthroughs were expected this year, there were signs that the nation's economy might begin to see a stronger recovery in the second half of this year.

The forecasts were made by experts who attended a workshop here on Wednesday hosted by Ha Noi National University's Centre for Economics and Policy Research.

The agricultural sector would become the spotlight of the economy, making healthy contributions to the nation's exports, economist LaViet Ho told the workshop.

But the Viet Nam Academy of Social Sciences forecast the economy was at risk of slowing this year, predicting growth of 5.3 per cent, inflation of 7.3 per cent, and unemployment of 3.85 per cent.

The academy has proposed a stimulus plan that would include cutting the value-added tax, personal income tax and corporate income tax.

Continuing to hold inflation in check would depend upon the effect of unpredictable factors such as electricity rate increases and the recent increase in the minimum wage, as well as the Government's reluctance to loosen monetary policy until late last year, Centre for Economics and Policy Research director Nguyen Duc Thanh said.

Thanh warned that the Government's goal to keep inflation this year under 6 per cent would be difficult to achieve and predicted that inflation would ultimately approach 10 per cent. To counter these pressures, he urged policymakers to cap the deposit interest rates being offered by commercial banks.

Thanh expected the Government would continue with a cautious monetary policy aimed at controlling inflation while promoting modest growth.

The centre has forecast economic growth this year of 5.2-5.3 per cent, comparable to last year's pace, he said.

Thanh also predicted that the process of restructuring State-owned enterprises would continue to stagnate this year due to a lack of detailed administrative oversight and the failure of many State-owned enterprises to resolve their bad debt situation.

Resolving the bad debt crisis in order to ensure the health of the nation's banking system would remain a focus of policymakers, however.

Thanh said he anticipated few policy initiatives in the coming year that would improve the nation's business and investment climate.

The balance of trade might also swing back to a slight deficit once domestic production recovered towards year's end, he said.

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