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More stimulus: Who’s for, who’s against?   2009-10-28 - VNNB

The Government has said it will make a final decision on a second economic stimulus package by the end of October and submit it to the National Assembly.  Sentiment on whether to extend the stimulus in some way seems about evenly divided.  We survey recent opinions.


The 2009 stimulus package, valued at $8 billion in additional spending, featured tax exemptions, reductions and deferments for businesses, increased bond sales, and an interest rate subsidy program. It is widely credited with enabling Vietnam to maintain a positive growth rate in 2009 despite world-wide recession. 

As the debate on has developed, concern at first was centered on the possibility that continued stimulus could trigger a new burst of price inflation.  During October, however, there’s been considerable new emphasis on reports that the interest rate subsidies ‘missed their target.’



Le Duc Thuy, Chairman of the National Finance Supervision Committee, told the European Chamber of Commerce that a halt in stimulus spending would shock Vietnamese businesses that have yet to fully recover from the global crisis.


Vu Viet Ngoan, vice chairman of the National Assembly's Economic and Budget Committee, supported continuing stimulus spending into 2010.


Vietnam’s Stock Markets.  Anticipation that a stimulus package may be enacted has been a factor pushing the HCM City index to nearly 600.



Minister of Finance Vu Van Ninh says that in view of the continued global economic crisis, continued but more carefully targeted interest rate subsidies will be needed to stabilize the economy in 2010.  The economy has recovered but still hasn’t regained a high rate of growth. The ministry wants to limit the loan subsidy to firms that will invest it in building up production.

State Bank Governor Tran Van Giau: the period of rescuing the economy is over, now we’re in the period of restarting growth and ensuring welfare. Policies that aim to promote growth and policies to serve welfare must be made clear.

Ministry of Planning and Investment: Continue but reduce the loan subsidy, simplify it and prioritize help to farm families and manufacturers producing for export; discontinue tax breaks but extend filing deadline.  

Fatherland Front Chairman Huynh Dam: the voters want the Government to evaluate the results of the 2009 stimulus package fully and objectively before deciding on a new package.  There need to be timely corrections to make sure loans go to the proper borrowers and for the right reasons.

Vu Thanh Tu Anh, research director of the Fulbright Economics Teaching Program in Vietnam: Signs of a full recovery are not clear yet, so the government therefore needs to keep economic support in place, especially infrastructure investment.  However, if the package can’t stimulate growth, consumption and investment and all the money go to real estate and stock markets, then we’ve failed to achieve our targets. . . . My viewpoint is that the loan subsidy program should not be kept in the second package.”

ADB staffer Jasseem Ahmed: “For the moment we agree with the government that the risk to growth is more important at this stage, but a deficit on the order of 10 percent is only sustainable as a temporary measure. It should be coming down next year.”  Expectations of accelerating inflation “need to be managed carefully going forward.”




Economic commentator Le Dang Doanh:  “I am very concerned about the risk of inflation returning to Vietnam if the government goes ahead with a second stimulus package. . . .  If a stimulus is implemented, it should focus on farmers and private-sector companies.”

Ha Van Hien, chairman of the Economic and Budget Committee, says that although the interest rate subsidy program had helped bail out many businesses this year, it should wrap up at the end of this year.  Hien seems to reflect the sentiment of most of his committee members, judging from their comments in a 22 October debate.

State Bank of Vietnam Deputy Governor Nguyen Dong Tien said in late September that “rate subsidies, if provided for a long time, will make businesses more reliant on fiscal stimulus and less competitive. . . .  Instead of further stimulus spending, the government should improve the business environment.”

National Assemblyman Tran Du Lich, former head of the HCM City Economic Institute says the four percent loan interest subsidy has done its job; now it’s time to let market forces do their work.

Economist Bui Kien Thanh says that the government should not consider a new stimulus package built mainly on interest-rate subsidies.  “It’s not practical for the government to keep on paying loan interest for companies and it is a sign of the old subsidy mindset.”

ADB Vietnam Director Ayumi Konishi: “The monetary system is facing increasing risks besides the return of inflation. . . .  I don’t think that this is a good time to announce a second stimulus package”.

The Small and Medium Enterprises’ Association doesn’t support another round of demand stimulus.   SMEA deputy chairman Nguyen Quang Luu says the first package has cost the state budget heavily and that another package would further burden the budget.  “A big sum of capital from the first demand stimulus package has gone to the wrong addresses.”.


Benedict Bingham, IMF representative in Vietnam:  Vietnam still has to maintain a careful balance between maintaining macroeconomic stability and supporting economic activity,” he said. A greater focus on inflation and the balance of payments “is appropriate in our view, especially given the signs that economic activity is holding up relatively well.”

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