Many challenges remain

However, the National Financial Supervisory Commission (NFSC) says, the aggregate supply and demand remains unsteady.

The Index of Industrial Production (IIP) in the past seven months increased by 4.8 percent, about half the 8.8 percent growth recorded in the same period last year. 

Most criteria of aggregate demand are low. Total retail sales and services only rose by 18.7 percent against last year’s growth rate and the trade deficit in the reviewed period was around US$58 million 0.09 percent of total exports. This is the lowest level so far compared to the average level of US$9 billion recorded in previous years.

Imports of livestock feed and other materials for production were down 6.9 percent from a year earlier.

The State Budget saw domestic sector collections reaching only 47.4 percent and import-export business contributions just 38.3 percent of the projected levels.

Contributions from crude oil earnings by July 15 was just 49.9 percent, much lower than the 60.1 percent level in the same period last year. This shows it is quite difficult for the state to keep its spending and deficit levels below 4.8 percent in 2012 as expected.

There are no promising signs of credit growth. Although the State Bank of Vietnam has adopted several measures to lower interest rates to help businesses access bank loans, the credit situation remains in a fix. By July 25, the credit balance were 0.1 percent compared to a year earlier.

Temporary drop in inflation rate

Judging by the above-mentioned situation, the NFSC forecast that economic growth would face challenges arising from weak demand. However, it said, GDP growth would not drop below 5 percent as tax deferments and exemptions, combined with the immediate disbursement of investment capital from the State budget, were in progress.

The NFSC added that if credit growth reached more than 6 percent, economic growth would be more than 5.3 percent.

It seems exports in the remaining months of this year would further decline because of the global economic downturn and sluggish activity in key export markets such as the US and the EU.

In the meanwhile, imports would increase to make the trade balance shift from its surplus in the first seven months of 2012 to a deficit later in the year but much lower than estimated.

Inflation in July dropped by 0.29 percent compared to June, representing the second month with a negative sign. According to estimates (disregarding factors such as cooking, foodstuffs and petroleum) the rate of inflation still increased by 0.6 percent over the previous month and by 8 percent compared to last year’s figure.

This indicated that monetary policy was not the main reason for the recent decline in the prices of goods and services.

There are some outside factors to consider. For instance, increasing prices in international markets and imported pressure from China in the fourth quarter would lead to higher CPI growth in the next few months and keep inflation at 5 percent. However if policies were not tightly controlled, inflation would raise its ugly head again.

Source: VOV