Nguyen Xuan Phuc, chairman of the Government’s Office, said at a press briefing Saturday that the world economy is forecast to see more serious recession in 2009, which will negatively affect Vietnam’s export, investment, tourism, and stock market sectors.

Export growth will grow only by 10-12 percent next year as the United States and Europe, Vietnam’s biggest importers, experience economic recession, Phuc said.

The government will try to limit the state budget deficit to 4.3 percent of the GDP, keep the poverty rate at 15 percent, and generate 17 million new jobs, he said.

To this end, Vietnam will “continue to put priority on curbing inflation,” estimated at 22 percent in 2008, lower than the initial estimate of 24 percent, he said.

Specifically, the government will apply flexible monetary policies, continue reducing state investment in ineffective projects, and implement tax policies which facilitate business and production activities, the chairman said.

Vietnam will look to expanding potential markets including China, Russia and the Association of Southeast Asian Nations (ASEAN), he said.

The country will also adjust the prices of some commodities like electricity and coal under the market mechanism, continue to call for more foreign direct investment (FDI), and improve implementation of social welfare programs.

Increased investments will be made in rural infrastructure development in an effort to keep living standards from slipping further than in 2008, Phuc said. In the first 10 months of the year, FDI inflows were over US$59.3 billion, up 5.2 percent over the same period last year. The FDI figure for the whole of this year is likely to be around $60 billion, Phuc said.

Meanwhile, the country’s industrial value is set to increase 15.8 percent to VND547.2 trillion ($33.2 billion) between January and October.

The challenges for the coming year will be weakening purchasing power and investment demand in all countries because of the global recession, Phuc said.

Vietnam’s export turnover is going downward at $5.1 billion in October, compared with $5.3 billion in September and $6.1 billion in August, because of decreasing export prices of some key items.

Total expected export revenues of $64 billion in 2008 will mark a 32 percent increase over 2007, Phuc said.

Banking system stable

As for bad debts, Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien asserted that “our banking system is currently safe, the payment ability is ensured, and there are no commercial banks without payment ability.”

“As of September 30, the banking system’s bad debts stood at some VND35 trillion ($2.1 billion), accounting for 2.92 percent of its total outstanding loans,” Tien said, adding that the situation was safe as long as the rate was below five percent.

Bad debts will be adjusted against the risk prevention fund worth over VND22 trillion ($1.3 billion). Insolvent debts make up less than half of the fund, Tien said.

In Hanoi and Ho Chi Minh City, the percentage of bad debts in real estate was lower than 2.5 percent.

“Bad debts may increase in the remaining months, but it is difficult to exceed four percent (of the total outstanding loans),” Tien said.

Reported by Bao Van