2012: Highest economic growth of only 5.1%

Vietnam's economic growth in 2012 is likely to be only 5.1% at best and inflation at only 6.2%. Economic recession is the most serious problem this year.

That is the forecast and assessment in the annual report on Vietnam's economy in 2012 published by the Center for Economic and Policy Research (VEPR), Hanoi University of Economics this morning, May 24.

Representing the research team, Director of VEPR Center, Dr. Nguyen Duc Thanh presented this report saying that Vietnam's economic growth forecast for 2012 is likely to be the lowest since 2000.

Accordingly, the research team's low scenario only forecasts GDP at 4.4%. The second, more optimistic scenario also only reaches a modest level of 5.1%.

Inflation for the whole year of 2012 is also forecast to be very low. The two forecast scenarios are only from 4.6% to 6.2% respectively.

It can be seen that these two scenarios are more pessimistic than the Government's target of inflation at around 9% and GDP at around 6-6.5%.

However, these scenarios also agree with some recent concerns of the Government that inflation is very low and the economy will find it difficult to achieve growth of 6-6.5%, but for now, because the first quarter has just passed, the Government has not yet adjusted this growth target.

Purchasing power declines due to economic difficulties (illustrative photo)
Dr. Nguyen Duc Thanh expressed that current inflation is strangely low, with the risk of negative inflation and decline. Aggregate demand is exhausted, leading to low economic outlook forecasts.

With the theme "Facing the challenge of economic restructuring", this year's economic report of VEPR also provides in-depth research and analysis on three pillars including banking, state-owned enterprises and public investment.

Dr. Nguyen Duc Thanh shared that persistent macroeconomic instability stems from the internal structure of the economy. The growth model that relies too much on the inefficient state-owned enterprise sector has reduced the overall productivity and efficiency of the economy.

The fundamental problem of the current macro economy is to resolve bad debt in the commercial banking system and create conditions for the market to restructure enterprises, thanks to the support of bankruptcy procedures, mergers and acquisitions of enterprises.

These two tasks are interrelated, helping to create conditions for real interest rates in the economy to decrease. At the same time, accelerating the process of restructuring the enterprise system according to market mechanisms will help the economy regain a faster growth rate in the post-recession period.

This report recommends that, as developed countries are having to review their growth models when the world is in crisis, Vietnam needs to seriously consider the past economic model and current orientation. If we do not have a clear and decisive perception of the new model for economic development, along with appropriate supporting institutions, the reform will not have a real goal. Vietnam will find it difficult to overcome the challenges that the current restructuring process is posing.