VINACHEM

Vietnam’s economy is coping with a slew of woeful challenges this year as fresh problems have arisen, said a Ministry of Planning and Investment report sent to the May 4-5 cabinet meeting in Hanoi.

The report said the macro economy is facing destabilizing factors while inflation may exceed the full-year projection of 5% due to rising oil prices and wage hikes. The consumer price index (CPI) in the first four months of 2016 edged up 1.41% year-on-year.

Interest rates are much higher than inflation and businesses still find it hard to take out bank loans. A zero interest rate applied to deposits in U.S. dollar has helped prevent dollar hoarding but caused hindrances to the mobilization and use of idle dollar funds in Vietnam.

The ministry is concerned that gross domestic product (GDP) growth could not reach 6.7% this year as targeted by the Government due to the slowdown of the agricultural, manufacturing and export sectors.

The ministry projected capital mobilization for public investment projects and official development assistance (ODA) and preferential loans would decline this year compared to previous years.

Regular expenditures have continued swelling, accounting for 65% of total budget expenditures, while development investments have dropped from 30% to 17% of the total.

The ministry said budget collections could not be enough to finance regular expenditures and debt payments. Development investments now depend entirely on the Government’s loans.

Meanwhile, ODA loans are forecast to dip steadily and be replaced with loans that carry shorter terms and higher interest rates. The Government will find it more difficult to borrow from domestic sources.

Bond sales by the Government and the State Treasury, which normally depend on State financial institutions, commercial banks and insurance firms, are inefficient.

The report showed 9,450 enterprises suspended operations in quarter one, up 40.5% from a year earlier.

The number of firms waiting to be dissolved was 15,658, a 27.4% pickup year-on-year, and 3,759 companies were dissolved, up 15.7%.
Notably, people hit by drought, salination and mass fish deaths on the central coast have been in distress. Paddy, fruit and industrial tree farming areas have been heavily affected.
Farmers and fishermen are unable to pay debts