The country’s recently announced statistics showed that the economy this year has run into more problems than in previous years. 

At a two-day Government meeting with provincial authorities on the National Assembly’s resolution on socio-economic development and State budget that ended last Friday, the Ministry of Planning and Investment reported gross domestic product (GDP) in 2011 was forecast to grow 5.9%.

Minister of Planning and Investment Bui Quang Vinh said: “Economic growth has been affected by the country’s efforts to contain inflation, stabilize the macro economy, restrict credit growth, and cut public investment.” 

Public spending remains high

According to the ministry, the total investment in 2011 is expected to reach VND870 trillion, 34.7% of GDP. The amount sourced from the State budget and government bonds sales has amounted to VND220 trillion, and the State credit some VND50 trillion.

The amounts reduced and transferred to other projects in need of funding total VND81.5 trillion, with over VND9.4 trillion of it coming from the State budget, government bonds and lottery revenue. Thanks to the capital cuts and transfers, an additional 1,053 projects have been finalized this year, taking the finished projects in the whole year to 4,400. 

The ministry ascribed the decline in investment capital n the economy to the Government policy to cut public investment in order to curb inflation, whereas businesses have been experiencing tough times.

However, at the recent meeting of the National Assembly (NA), the NA Finance and Budget Committee indicated a different view. The investment and development cost has still exceeded the estimate and increased by 15.1%, or VND23 trillion, a high level given the fiscal tightening and public investment reductions.

At the conference last Friday, the ministry said it had properly implemented the cost cutting campaign, with 10% of the regular expenses, or over VND3.8 trillion, trimmed.

Regarding this issue, the NA budget committee admitted the total State budget spending had surpassed the estimate by 9.7% despite the Government’s Resolution 11 on public spending reduction. 

Businesses in trouble

The report of the ministry said low consumer demand and rising inventory had added to the difficulties faced by local manufacturers.

As of October 1, 2011, stockpiles in the manufacturing and processing industries had surged 21.1% year-on-year, cement by 84.4%, footwear by 49.9%, auto and motorbike by 49.5%, electronic cables and wires by 88% and livestock feed by 42%.

Industrial production has still recorded growth but at a lower rate. The country’s Index of Industrial Production (IIP) in the January-November period rose 6.9% over the same period last year.

Overall, the total retail sales of goods and services are expected to jump 24% over 2010. This growth is insignificant if inflation of over 18% is taken into account.

The ministry said only six State-owned enterprises had been equitized this year, bringing the total number of equitized enterprises nationwide to over 3,900, along with 1,905 enterprises that have been restructured, merged or sold.

And other figures

It is estimated the total money supply this year would rise 10% against December 2010 and the total outstanding loans would increase 12%, compared to the respective targets of 15-16% and less than 20%.

This year’s total export revenue might amount to US$96 billion, up 33% over last year, or three times higher than the target of 10%. Meanwhile, the total import bill would reach US$106 billion, surging 25%, compared to the target of 10.4%.

The total balance of payment surplus is expected at US$2.5 billion, an encouraging figure compared to the US$3.07 billion deficit recorded in 2010. The foreign reserves have increased from three and a half weeks of import cover in the first quarter to seven and a half weeks in the third quarter of 2011.

Source: SGT