2011 - a year of economic fluctuations
Though Vietnam ended 2011 with a high inflation rate of over 18 percent, its macroeconomy gained remarkable achievements, creating a vital prerequisite for steady growth in 2012.
Following are the top ten economic events in 2011 as chosen by VOV Online:
1. Controlling credit growth
The Prime Minister issued Resolution No.11 on February 24 to curb inflation and stabilize the macro-economy. Just one week later, the Governor of the State Bank of Vietnam (SBV) issued Directive No. 01/CT-NHNN, aimed at pursuing a tight and prudent monetary policy and keeping credit growth below 20 percent and the non-production debt rate at around 16 percent, as well as maintaining reasonable interest and exchange rates levels.
At its recent annual meeting, the SBV announced that total payment methods saw an increase of 10 percent while credit growth stood at 12 percent, doubling the GDP growth.
Vietnam’s inflation rate hit 18 percent in 2011, but that figure is expected to be cut by half in 2012. The ongoing measures for restructuring of the economy, reducing bank interest rates and increasing the effectiveness of public investment are expected to open up better prospects for the national economy in the new year, targeting annual GDP growth of 6-6.5 percent.
2. Economic restructuring
The third meeting of the 11th Communist Party of Vietnam Central Committee (CPVCC) and the 13th National Assembly agreed to focus on restructuring the national economy. Accordingly, the three top priorities are promoting public investment, renewing the banking system, and restructuring State-owned enterprises (SOEs), primarily groups and corporations.
3. Record export revenue
Vietnam recorded a record trade turnover of more than US$200 billion in 2011, the highest figure to date. Export revenue saw a year-on-year increase of 33.3 percent, while import surplus was less than 10 percent, the lowest it has been in the five years since Vietnam joined the World Trade Organization (WTO).
4. First ADB annual meeting in Hanoi
The 44th annual meeting of the Asian Development Bank (ADB) was held in Hanoi on May 3 with nearly 3,600 participants.
Nearly 20 seminars and group discussions were held during the meeting for financial experts and senior officials from many countries around the world.
Foreign guests praised Vietnam’s socio-economic achievements during its 25 years of renovation, especially in poverty reduction. They considered Vietnam as one of their key partners that has shifted from low-to 1middle-income status.
5. Credit debt - hot issue
Large-scale bankruptcies of illegal capital mobilization occurred in many provinces and cities across the country in 2011, in some cases involving hundreds of billions of Vietnam dong each. Most of these bankruptcies were related to borrowers’ losses in the stock and real estate markets.
The frozen housing market caused many credit organizations to go bankrupt because their clients were unable to pay debts.
6. First domestic bank merger
On December 6, the Governor of the SBV approved the merger of three commercial banks in HCM City: De Nhat Commercial JS Bank, Vietnam Tin Nghia Bank and Sai Gon Bank.
The Bank for Investment and Development of Vietnam (BIDV) was the official representative of State capital in the new enterprise, with total assets of VND150,000 billion.
This was the first domestic merger since the SBV announced its overhaul plan last month, aimed at restructuring the national banking system and resolving bad debts.
7. Gold market fever
Domestic gold prices went up 25 percent on average and 40 percent at their peak, reaching VND49.2 million per tael on August 23.
They fluctuated sharply before dropping to around VND42.6 million per tael by the year’s end.
On the world market, gold prices rocketed to US$1,923.7 an ounce due to increasing public debts in Europe and general global economic downturn. Speculators and monetary management funds increased their gold reserves to a record of 2,370 tonnes, equivalent to the world’s total gold mining output in 2011.
However, both domestic and foreign gold prices shared a downward trend in the fourth quarter of the year, falling to US$1,562 per ounce on December 31.
At certain times, gold prices on the domestic market were VND3-5 million per tael higher than those on the world market.
8. Securities market slowdown
Vietnam’s stock market suffered numerous difficulties in 2011 and the price of shares hit a record low.
By December 27, VN-Index lost its 350-point mark, while the HNX-Index dropped to 56 points, its lowest level so far.
The Government is currently considering measures to help restructure the securities market.
9. Real estate market freeze
Speculators in the real estate market suffered huge losses in 2011. Because of the country's tight monetary policies, it was more difficult to obtain bank loans to invest in real estate than it was in previous years.
Moreover, the imbalance between supply and demand in the housing market is widening, leading to a sharp fall in real estate prices.
10. Public debt impact
The European debt crisis has taken its toll on many countries and Vietnam is no exception. Foreign trade faced numerous difficulties, especially in the export and foreign invested sectors. The crisis will certainly affect Vietnam’s export target for 2012.
In another development, Standard & Poor's lowered Vietnam's local currency long-term rating to BB- from BB. It also produced negative outlook for Vietnam’s debt ratings.