The government will consider the second economic stimulus package until the end of October, said government office chief Nguyen Xuan Phuc.

Government’s office chairman Nguyen Xuan Phuc.

In a government meeting in September, Deputy PM Nguyen Sinh Hung suggested careful consideration before making a decision about the second economic stimulus package. He said that the government should appraise the effectiveness of the first economic stimulus package in the October cabinet meeting and listen to the opinions of local and foreign experts.

Phuc said that launching a new stimulus package may make the local economy uncompetitive but if the world economy continues to struggle local enterprises need to be assisted.

According to the government, the first stimulus package with interest rate subsidy has worked well and helped the economy escape from the impacts of the global economic crisis. Vietnam still grew in the first nine months of 2009 and is expected to reach a GDP growth rate of 5 percent.

In the cabinet meeting in September, Prime Minister Nguyen Tan Dung and cabinet members agreed to set the GDP growth rate for 2010 at 6.5 percent. Policies are designed to support this target.

The usefulness of the first stimulus package and the launch of the second package is now being discussed by the business community and experts. Most members of the National Assembly’s Economic and Budget Committee said it is time to stop the 4 percent interest rate subsidy policy for short-term loans.

They said that maintaining this policy may make an imbalance in capital supply and demand. The demand for credit in Vietnam dong is rising strongly while the need for foreign currencies fall.

In addition, the policy makes interest rates for deposits higher than lending interest rates. Many enterprises, that have banking deposits, still borrow capital from this programme because they enjoy low interest rates. There are also worries that the capital may not go to the right businesses, which most need assistance.

The rate of businesses that can borrow this kind of capital is not high. Only 22 percent of the total number of enterprises have had access to this source. It’s feared that it may cause inequality in economic relations between enterprises.

Vu Viet Ngoan, vice chief of the National Assembly’s Economic and Budget Committee, says Vietnam should pursue the economic stimulus policy until it really regains its stable growth. The global economy can resume in 2010 but this process needs time and it can assist with many risks and adverse impacts which may hit Vietnam. The fiscal policy for 2010 should increase government investment.

Ayumi Konishi, the Asian Development Bank’s (ADB) Director in Vietnam said that the monetary system is facing increasing risks besides the return of inflation.

“Compared to other countries, I may say that the Vietnamese government has done a good job,” he said. “We have raised Vietnam’s GDP forecast for this year from 4.5 to 4.7 percent. The Vietnamese government also predicts 5-5.5 percent. These are impressive numbers compared to the situations in other countries. But I don’t think that this is the good time for announcing the second stimulus package”.

VNN/VNE