VINACHEM

Vietnam’s economy will continue to recover next year but at a slower pace, said Nguyen Dinh Cung, president of the Central Institute for Economic Management (CIEM).

Speaking at a seminar on economic prospect held in HCMC on November 11 by the CEO Club, Cung said the macro economy would stabilize but depend greatly on external factors. However, world commodity prices are forecast to remain low, thus benefiting the Vietnamese economy.

According to Cung, Vietnamese enterprises will continue struggling with woes caused by high operational costs and limited access to funding sources. Interest rates for loans will stay high, making it hard for enterprises to borrow.

Cung said there has existed a paradox in Vietnam. Commodity prices have slid but interest rates have not dropped accordingly, he noted, and the main reason is huge bad debt.

The central bank said bad debt had been reduced to below 3% of total outstanding loans, but in fact, it has remained somewhere in the economy, with borrowers and lender banks still suffering.

The pace of budget collections is slower than that of spending and the pace of investment is slower that of regular spending. Budget deficit and public debt have been rising steadily over the years.

Cung said the Government should work harder to implement administrative and institutional reforms to instill confidence in small and medium enterprises (SMEs) to make long-term investments, use new technology and improve the personnel quality to increase their competitiveness. Otherwise, opportunities brought by free trade agreements would not benefit domestic enterprises.

Nguyen Thi Hong, deputy governor of the central bank, told the seminar that the central bank has adopted credit policy in favor of SMEs. In particular, it has set the ceiling lending rate for five priority fields which is two percentage points lower than the normal rate and issued regulations on credit guarantees for SMEs to access bank loans.

However, according to Hong, enterprises should meet borrowing requirements and improve governance.