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Vietnam’s finance support programme the best in Asia: report   2009-09-09 - VietNamNet/DT

Revealing some items from a report reviewing the Government’s demand stimulus package, Deputy Chairman of the National Finance Supervision Council Le Xuan Nghia said that the demand stimulus programme has been very effective.


Nghia stressed that Vietnam has every reason to feel satisfied about the demand stimulus package which was kicked off seven months ago in an effort to rescue the national economy from the impacts of the global economic crisis. Especially, Nghia mentioned the “seven ‘nos’: the seven possible side effects of the demand stimulus programme that have not happened.


1. No threat to inflation. Nghia said there is no need to worry about the return of high inflation in 2009 or next year. The National Finance Supervision Council has predicted that the inflation rates in 2009 and 2010 will not be high.


The inflation rate is forecast to be between five and 5.7 percent in 2009 and 7.8 to 8.2 percent in 2010. As the world’s economy is now recovering, the prices of input materials and fuel will increase, but not sharply, like what happened in 2008. Therefore, there is no factor that threatens to lead to a high inflation rate.


2. No credit bubble. The credit growth rate is expected to reach over 30 percent this year, which is much lower than that of 2007 and should be seen as a normal growth rate. Meanwhile, the credit growth rate of China had reached 97 percent by the end of August 2009.


3. No real estate bubble. In 2008, Vietnam disbursed 138 trillion dong to real estate development projects. The figure had reached 148 trillion dong by the end of June 2009, which represents a 7.6 percent increase over last year, but is much lower than the average credit growth rate.


4. The other four ‘nos’ are no liquidity crisis; no concerns about the foreign currency reserves in comparison with banks’ liquidity (the figure is now $18.19 billion); no debt crisis (the bad debt ratio is just a little higher than 2 percent); and no big problem in the operation of the banking system.


As the medium-term prospects of the finance system of Vietnam is stable, the macroeconomic prospects are bright.


The first report on the demand stimulus package monitoring has made the conclusion that the financial activities of Vietnam are among the best in Asia.


After the Government decided to launch the demand stimulus package worth 17 trillion dong in January 2009, a lot of plans were put forward. First, the package would focus on providing interest rate subsidised loans (both for working capital and for long-term investment) to small- and medium-size enterprises.


Second, the sum of money would be used to run big transport projects like highways, airports and seaports.


Third, the sum of money would be spent to build infrastructure items, houses for workers in industrial zones, houses for low-income earners, student dormitories and houses for the poor. Some experts suggested using the money to set up a credit guarantee fund for small- and medium-size enterprises.


Government agencies, after many discussions, concluded that it would dilute the effectiveness of the programme if the sum of money was used for too many purposes.


The Prime Minister decided at the Government’s meeting on January 17, 2009 that the entire 17,000 billion dong would go towards the 4 percent interest rate subsidy programme to help businesses to recover from difficulties.


With the 4 percent interest rate subsidy programme, businesses can get loans with lower cost. The actual interest rates businesses have to pay for the preferential loans are between 4 and 6 percent per annum, which are the same as the rates applied in many other countries (Thailand 7 percent, Malaysia 6.5 percent, the US 6 percent and China 7 percent).

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