VINACHEM

The country’s economic recovery has started to gain traction but aggregate demand has yet to strengthen, according to the National Financial Supervisory Commission.

A report by the commission on forecasts for the first quarter and the whole year said the pace of consumption recovery is slow with retail sales of goods and services (the price factor excluded) rising only 5.1% reported in quarter one, not much higher than in the same period of previous years (4.5% in 2013 and 5% in 2012).

Private investments have not improved much, which is evident in a credit contraction in quarter one. Credit growth was 1.17% and 0.22% in the first quarter in 2013 and 2012 respectively.

Meanwhile, spending on investment development declined 4.9% in the quarter while last year’s first quarter saw a slight drop of 0.3%. Economic growth is thus quite low compared to economic potentials.

Agriculture, especially rice, is facing difficulties in output and price. Although rice farmers have a bumper harvest, consumption of rice is still tough given the mounting pressure from Thailand’s ending the rice subsidy scheme and China’s food self-sufficiency policy.

Growth momentum depends much on the foreign investment sector. Export revenues (crude oil excluded) of the sector leapt 18.9% in the first quarter while those of the domestic sector edged up a mere 2.8%.

The report points out that it is necessary to continue stimulating consumer demand, supporting farmers in terms of produce prices, lowering interest rates, and helping enterprises and producers gain easier access to bank loans.

Besides, disbursements of investment capital sourced from the budget and government bond sales should be accelerated. Prices of essential goods and services, the exchange rate and aggregate demand should be regulated in harmony with monetary and fiscal policies, said the report.

However, the report showed optimism, saying the economy is back to the growth trajectory although the rate is modest. Economic growth is forecast to be higher in the coming quarters, so the possibility of achieving 5.8% growth is high.