(VEN) - The current Vietnamese economy can be compared to a person that has just recovered from an illness and still needs serious treatment in order to fully recover.
Statistics from the Ministry of Planning and Investment indicate that the gross domestic product (GDP) in the first quarter of 2010 was 5.83 percent higher than it was during the same period in 2009, while the 2010 GDP target set by the National Assembly is 6.5 percent. The GDP of industry, construction, agriculture, forestry, fishery and service sectors grew considerably. This is a major signal of economic recovery. The Vietnamese economy saw its lowest growth of 4.77 percent in 1999. It grew 8.46 percent in 2007 but only 5.32 percent in 2009.
The country's industrial production during the first quarter of this year increased by 13.6 percent in value, when compared to the growth rate during the same period last year; an important sign as it augurs export recovery possibilities, while it grew only 7.6 percent 2009.
Vietnam earned export revenue of about US$14 billion in the first quarter of 2010, which is 1.6 percent less than revenue from the same period in 2009. The country's 2009 export revenue is 9.7 percent less than 2008's revenue, which is the biggest decrease since 1992. The drop in exports has slowed. Domestic trade is being developed in order to offset the drop in foreign trade. In terms of value, retail sales and services in the first quarter of 2010 are 24 percent more than the same period in 2009, while sales from 2009 were 18.6 percent higher than the figures from 2008.
Although optimistic signals exist, the Vietnamese economy still faces major challenges.
One of these is that exports just yielded more than US$7.3 billion in the first quarter of 2010, which is 9.5 percent less than the same period in 2009. Agricultural goods, forest products, seafood and mineral exports fell only 1-1.2 percent. Foreign direct investment (FDI) companies reported earning export revenue of US$6.68 billion, which does not take into account crude oil revenue. This was 40.5 percent higher than revenue from the same period last year. Vietnamese businesses' competitiveness and recovery capability remains humble in the field of processed goods export. This directly affects the state's foreign currency budget revenue.
Another challenge affecting the country is its high trade deficit. While exports fell 1.6 percent, imports increased by 37.6 percent to reach US$17 billion, which resulted in a trade deficit of more than US$3.5 billion in the first quarter of this year. Vietnamese businesses imported over US$3 billion more than they exported while FDI companies imported US$420 million more than they exported.
An increasing consumer price index (CPI), which augurs high inflation, is also another major challenge.
FDI attraction has not seen any recovery signals yet. In the first quarter of 2010, Vietnam attracted an additional US$2.14 billion in FDI. About US$2.5 billion was invested in the first quarter of 2010. FDI has not yet recovered because foreign economies have yet to completely recover. Likely Vietnam is still not attractive enough to attract more foreign investment.
A short supply of foreign currency and the increased credit interest rate appeared during the first few months of 2010. These factors remarkably affected production, domestic and foreign trade and investment.
Acknowledging the above-mentioned challenges is vital.
Since 1990 Vietnam has not had negative economic growth. When the former Soviet Union collapsed and the SEC bloc disbanded in 1991, Vietnam reported a GDP growth of 5.81 percent. This is not difficult to understand because Vietnam's GDP growth basically depends on investment capital increases, but not an increase in labor productivity or high technology application. Hence, the 6.5 percent GDP growth target that the National Assembly set for 2010 is not unattainable.
Vietnam needs to surmount the challenges posed if it is to stabilize its economy./.
By Luu Tien Hai
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