Controlling inflation - The brightest spot in the past 5 months.

In the first five months of the year, inflation control has yielded better-than-expected results: the CPI in May increased by only 0.2%; compared to December 2013, the CPI increased by only 1.08% - the lowest increase for the same period since 2002.

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First, let's talk about inflation control in the first five months of the year. Inflation control has yielded better-than-expected results. The CPI in May increased by only 0.2%; compared to December 2013, the CPI increased by only 1.08% – the lowest increase for the same period since 2002. The average increase for the first four months of this year compared to the same period last year was 4.72% – lower than in many previous months.

Low inflation has a significant impact on the socio-economic situation. It brings joy to consumers; reassurance to investors, producers, and businesses; and creates conditions for policymakers and macroeconomic managers to be more confident in formulating and implementing solutions to overcome difficulties in production and support the market. The results of the first five months are a positive sign that the CPI for the whole year will increase at a lower rate than the planned target (7%), possibly even lower than the previous two years (6.81% in 2012 and 6.04% in 2013), or even as low as 5-6% as indicated in the April regular government meeting.

Regarding macroeconomic stability, macroeconomic indicators are reflected in many metrics, including two main groups of indicators: the international balance of payments and the balance of state budget revenues and expenditures.

The international balance of payments encompasses many aspects, including the balance of trade (exports and imports of goods), foreign investment, and spending by international tourists, among others.

Exports showed some new developments. Due to months where exports exceeded $12 billion, the total export value for the first five months reached $58.51 billion, higher than the entire year of 2009 ($57.1 billion).

Previously, the domestic economic sector experienced low or declining exports, but now it has seen a significant increase (11.9%), demonstrating its efforts to capitalize on the opportunities presented by opening up and deeper integration into the global economy.

Exports of agricultural, forestry, and aquatic products reached $12.12 billion, accounting for 20.7% of total export turnover, a significant increase compared to the same period last year.

Some key economic indicators for the first five months of 2014 compared to the same period in 2013 (%). Source: General Statistics Office.

Similarly, in just 5 months, 12 product categories and 12 markets have reached a turnover of 1 billion USD or more. Many key product categories have experienced higher growth rates than the overall average, with some achieving both large scale and significant growth, such as telephones; textiles; footwear; seafood; coffee; pepper; handbags, wallets, suitcases, hats, umbrellas; wood and wood products….

Because exports increased more than imports (15.4% compared to 9.6%), the trade surplus for the first five months was $1.649 billion. This five-month result is a positive sign, indicating that the export growth rate for the whole year will exceed the target (10%), not only avoiding the large trade deficit as planned (over $8.7 billion), but potentially even achieving a larger trade surplus than in the previous two years.

The data for the first five months also shows that foreign currency inflows into Vietnam have been quite strong. Foreign direct investment (FDI) reached US$4 billion. Disbursed official development assistance (ODA) has increased. The number of international visitors to Vietnam in the first five months reached 3.75 million, an increase of 26.1% – a very high growth rate achieved across all four purposes of visit (tourism, business, visiting relatives, and other purposes). This is a positive sign for tourism to aim for new records in both visitor numbers and revenue compared to 2013.

Due to a significant surplus in the international balance of payments, the State Bank of Vietnam was able to purchase and increase foreign exchange reserves to $35 billion – the highest ever – ensuring the financial security and liquidity of the nation.

Regarding budget balance, while the previous two years faced significant difficulties, the pressure has eased considerably this year. The implementation rate from the beginning of the year to May 15th this year, compared to the annual budget forecast, shows that total revenue is higher than total expenditure (41.7% compared to 36.8%), with domestic revenue reaching 421.1% and revenue from crude oil reaching 49.9%, exceeding the overall implementation rate. The year-on-year growth rate of total revenue is higher than that of total expenditure, with domestic revenue and revenue from import-export activities showing even higher growth. Therefore, the budget deficit ratio compared to the annual forecast is lower than the ratio of total revenue and total expenditure; the budget deficit/GDP ratio in the first quarter was 4.9%, and it is likely to be lower for the whole year than the projected 5.3%.

Regarding economic growth, GDP growth since 2013 has shown signs of recovering from its lowest point, with a growth rate of 5.42% year-on-year (in 2012 it was 5.25%, the lowest since 2000); in the first quarter of 2014, this trend continued at a higher rate than the same period of the previous two years.

The industrial production index (IIP) in May increased by 5.9%, bringing the IIP for the first five months to 5.6%, higher than the 5.5% growth rate of the first four months. Manufacturing – the sector with the largest share in the overall industrial sector – saw a corresponding increase of 7.5%.

Several input and output factors showed signs of improvement. The amount of investment capital from the State budget in May was higher than in previous months (May reached VND 16.8 trillion; April nearly VND 15.54 trillion; March was VND 13.6 trillion).

Foreign direct investment (FDI) and Official Development Assistance (ODA) continued to increase. Credit growth was better than in previous months. The growth rate of total retail sales of goods and consumer service revenue, excluding price increases, increased by 6% in the first five months... Furthermore, it has almost become a tradition that our country's economic growth in the last quarters of the year is usually higher than in the first quarters.

However, several limitations and shortcomings remain in the first five months of the year. These include the lowest investment-to-GDP ratio in over 20 years, while investment is a direct material factor determining economic growth. Investment from the state budget continued to decline in the first five months (with local governments experiencing a greater decrease). Total retail sales of goods and consumer service revenue remained low…

One point to note concerns the complex developments from the beginning of May until now. Businesses need to research and assess these developments in order to proactively choose and expand investments and import/export markets with partners in a diversified and multilateral manner.

According to chinhphu.vn