PHÂN TÍCH TÌNH HÌNH KINH tế xã hội VIỆT NAM THỜI GIAN QUA en

FOREWORD According to the World Bank WB, 2012 was a difficult year of the world economy and it was forecasted that the global economic crisis will reach its peak in 2013; it was also war

FOREWORD According to the World Bank (WB), 2012 was a difficult year of the world economy and it was forecasted that the global economic crisis will reach its peak in 2013; it was also warned that countries need to prepare to deal with this risk, especially the protection of the most vulnerable groups, the poor, as well as maintaining stable economic growth As a leading global consultant – the consulting firm McKinsey & Company has studied and assessed the overall impact of the global recession on Vietnam's business environment to advise clients about their need to have reasonable plan and business strategy to reduce risk to the lowest level

I/ RECENT SOCIO-ECONOMIC SITUATION IN VIETNAM:

According to the Government's report on the socio-economic situation in 2012 at the fourth session of the National Assembly XIII on October 22nd, 2012, in the context

of world economic fluctuations are more complex and difficult, there was a sharp decline in trade, the global growth was lower than expected this year, which created the negative impact on the deeply integrated and highly open economy such as ours The socio-economic results of the first 10 months of 2012 are as follows:

1 Achievements:

a) In terms of inflation control, macroeconomic stabilization and difficulty solving for businesses:

- The inflation was initially controlled, with consumer prices is up 5.13% in 9 months In the last months of the year, we will take measures to keep annual inflation rate at about 8%

- Exports rose 18,9% to 83,79 billion U.S dollars, imports rose 6,6% to 83,76 billion US dollars, the international balance of payments got a surplus of $ 8 billion

The budget revenue got 67,3% and expenditures reached 71,2% of the estimate The total capital investment in social development was estimated at 29,5% of GDP (compared to 34,6% in 2011)

- Industrial production increased over each quarter The 9-month industrial production index rose 4.8%, with an estimated annual increase of 5.3% Agricultural, forestry and aquatic production continued to grow and play a very important role in the economic stability of the rural area

- Economic growth in 9 months was 4.73%, estimated at about 5.2% for the whole year, lower than planned but the later quarter is higher than the previous quarter, inflation was controlled, macro-economic situation was more stable, which are the good signs for sustainable development in the future

b) In terms of restructuring the economic structure and reforming the growth model:

- Continue the economic restructuring scheme including restructuring state-owned enterprises, restructuring of financial markets, banking and investment based on the spirit of the Central Resolution 3 (XI), consider these as the important content in the overall restructuring

- Implement the restructuring of commercial banks, especially the weak banks, along with the processing of bad loans Implement the restructuring of corporations, state corporations by focusing on the main business, with suitable size for the market, management capability and financial capacity

c) In terms of ensuring social benefits:

The government has focused on the implementation of synchronous programs, social policy, focusing on job creation, income generation and poverty reduction The annual estimated poverty rate fell 1.76% Even though it did not reach the planned rate

of 2%, but in difficult economic conditions, this is a great effort We have created 1.13 million new jobs, estimated at about 1.52 million for the whole year

d) In terms of developing the culture, education, technology, and environment protection:

Culture, sports continue to be focused, associated with the implementation of the campaign to build cultural life and the new rural construction program There was the project development of science and technology to form the basis of implementation of strategic breakthrough in the development of human resources, restructuring and growth model transformation Scientific research activities achieved positive results Some research has practical and scientific value and practical contributions to the socio-economic development The level of technology in a number of areas such as electronics, information technology, oil and gas equipment manufacturing was enhanced

e) In terms of administrative reform, anti-corruption and saving practices:

- Administrative reforms continue to be implemented synchronously in terms of institution, personnel organization, government administrative and financial procedures, especially in budget revenues and expenditures, capital allocation, financial mechanism with the public service units such as health, education, science and technology

- The prevention of corruption continued to be focused in direct association with the implementation of the Central Resolution 4 (XI) We have reviewed the implementation of Resolution 3 and Central Anti-Corruption Law We enhanced the supervision, inspection and coordination of the agencies in the fight against corruption and waste Focus on direct handling of corruption cases

f) Enhance the foreign affairs activities, ensure the country defence, and stabilize socio-economy:

- We have implemented many solutions which are consistent and timely solved arising issues, maintained socio-political stability and independence, national sovereignty

The national defense posture and the people's security were enhanced Armed forces continued to be built in the direction of revolutionary, regular, elite, modern step

by step The defense capability and industry were raised There was a closer link between economic development and strengthening national defense and security

The prevention of crime and ensuring public order and social safety was enhanced and there are positive changes We have destroyed many large-scale crime institutions, especially drugs and trafficking We have strengthened communication and education about juvenile crime prevention Traffic order and safety are focused directly; the number of accidents was reduced greatly, in terms of the death toll and injured

2 Limits and weaknesses:

- Unstable macro-economy, inflation remains at risk of rebound Bad debts increase and handling is slow and difficult Companies still had to deal with many difficulties, can’t access the capital, big inventory Stagnant real estate market is not likely to recover soon, which creates many potential risks

- Some corporations, state corporations operate ineffectively, illegally, causing great loss of state assets The quality, efficiency and competitiveness of the economy have not improved much The economic and social forecasting capacity is still restricted and doesn’t meet the requirements

- The life of a part of the population, especially in remote areas and ethnic minorities, got more difficult Due to limited resources, the expansion and improvement

of the level of support of social welfare policy, poverty reduction programs, new rural construction, job creation and wage reform did not meet the requirements

- Education and training is still weak; the quality of training of many universities, colleges was slow in improving; Science and technology couldn’t meet the requirements in terms of productivity, quality and economic competitiveness improvement

- The management of natural and environmental resources was still inadequate; there were a lot of pending big projects The environmental pollution in industrial parks, manufacturing facilities, villages, river basins was still heavy The flooding in some major cities was slowly to be overcome

- There was still some disappointment about the social order and safety; especially crime, social phenomena, traffic law violations, food safety

- Administrative system reform did not meet the requirements Many administrative procedures are no longer appropriate and slow to be changed The administrative discipline inspection and supervision was still weak, reducing the effectiveness and efficiency of management and administration A part of the government officials turned into bad and failed to fulfill their responsibility, which created harassment and the negative impact on the trust of the people

II/ THE CURRENT GLOBAL DEPRESSION:

1 – The government debt crisis in Europe:

- The European government debt crisis is a debt crisis first bloomed in Greece in early 2010 when the cost of government debt increased continuously The crisis then spread to Portugal, Spain, followed by Italy in the Euro area France is a country with high risk of falling credit ratings; the Republic of Cyprus has been pushed to the brink

to get bailout

- On 2/5/2010, the member countries of the euro zone and the International Monetary Fund have approved a loan of 110 billion euros for Greece, provided that the country must implement tough austerity measures

- On 09/05/2010, the European Minister of Finance has approved the rescue package worth 750 billion Euros in order to ensure financial stability in the Euro zone, and set up the European Financial Stability Committee Followed by a 85 billion Euro bailout package for Ireland in November 2010 and 78 billion Euros for Portugal in May

2011 The debt crisis has threatened the existence of the euro currency, influenced the

global financial system, and made the Greek Prime Minister and the Italian Prime Minister to resign On 06.02.2012 the Government of Romania is the 6th European government collapse due to debt crisis

- According to statistics published on 15.11.2012, in the third quarter of this year, the gross domestic product (GDP) of the Eurozone fell by 0.1%, after 0.2% in the previous quarter Thus, according to the economic definition, the Eurozone is officially

in recession by the two consecutive quarterly decline If compared with the same period last year, the GDP of the Eurozone fell 0.6%, the overall European Union (EU) fell 0.4% before a possible slightly increase by 0.1% in 2013

- European Central Bank (ECB) also warned that monetary union could face the risk

of more serious crisis to decline 0.5% this year and 0.3% for 2013

- The statistics said that in the last quarter, Germany - the number one economy in Europe - only had modest growth of 0.2%, lower than the 0.3% in the second quarter and 0.5% in the first quarter France is also struggling to achieve growth of 0.2% Although the German and French economies continue to grow, but when considering all

17 member economies, the eurozone still has fallen into deep recession

- The "modest" Growth of Germany, France, could not pull the Europe ship accelerate as the economy of the Netherlands, Spain, Italy and Austria all decelerate In the third quarter, the economy of Spain and Italy - the countries imposing the unpopular measures to "tighten their belts" - fell by 0.3 per cent and 0.2 per cent Meanwhile, the Austrian economic decline 0.1%, Netherlands fell 1.1%, the deepest decline in Eurozone

2 – The government debt crisis in the US:

- The Credit rating agency S & P has cut the U.S AAA credit rating to AA + rating, due to concerns about the budget deficit, which raised the debt ceiling of the world's largest economy This is the first time since 1941 to date, a statement of the S &

P has created an economic shocks, threatening bankruptcy in the United States (the

volume of government bonds in the United States is up to 9340 billion; the government debt, based on the debt meters, has reached more than 14,000 billion), even though the debt problems of the countries of the European Union (EU) has not been resolved

- Insolvency stories happened right after the world economy showing signs of recovery from the financial and economic crisis in 2008, starting from a number of countries of the European Union As of 2010, the U.S public debt reached 90.4% of GDP, the general level of the EU is 80.3%, of which Greece: 123%; Italia: 127%; Ireland: 142% Japanese with the record high: 197% of GDP Up to the present time, these indicators are higher

- When more than 70% of U.S Treasury bonds held by outside private investors matures after 5 years, the poor investor confidence in the United States will cause interest expense for the government and the private sector of U.S increased

- Total U.S government bonds held by China in January fell by $ 5.4 billion, to $ 1.155 billion, down continuously for three consecutive months In December last year, China sold a net $ 4 billion of U.S government bond

- The foreign central banks hold $ 3,150 billion U.S government bonds out of $

4440 billion in circulation abroad

- The investment fund of Jim Rogers, the president of Rogers Holdings and Beeland Interests, Inc also decided not to continue lending money to the U.S government again

- Recently, the problem of public debt has put the U.S government onto the

"thousand pounds hanging by a thread" situation into the state of inability to pay debts -bankruptcy The story seemed to have finished on the agenda of the Senate and the U.S House of Representatives, but the debate and discuss of solutions to overcome, or at least re-evaluate the impact of the debt crisis still continue

- Canada's Financial Post dated 22/08/2012 commented that the U.S debt crisis is still large and dangerous for the world economy more than the European debt crisis

because the European Union(EU) are solving their financial crisis, while the U.S appears to be paralyzed

III/ THE IMPACT OF THE GLOBAL RECESSION ON VIETNAM:

The recession of the world economy is having a strong impact on Vietnam, including both positive and negative, expressed by some aspects as follows:

1 Negative impact:

The world is now faced with the economic downturn, reduced energy demand in major markets such as the U.S and Europe In addition to energy, the demand for essential products also decreased due to the fact that the economy has fallen into this predicament The world economic downturn has some impacts on Vietnam as follows:

- Decreased export: Because the country's major export market is the United States and Europe, so when the market falls into recession and difficulties, the demand will decline The reduced demand will make the export of our products in these markets be less, and will create a bad impact on GDP (down)

- The development cooperation between Vietnam and foreign partners – which are affected by the crisis - will be interrupted or halted due to the financial difficulty This negative impact affects the project or investment in our long-term development

- The fact that U.S fell into recession created the dollar depreciation on the international market, which is by no means, a small impact on export Due to dollar devaluation, export is not as profitable as before ($ 1 USD in exchange for less VNDs) Thereby it reduces the country's GDP

- Tourism: The smokeless industry is not immune from the impact When the country is in depression and crisis, its people will limit their consuming and be reluctant

to travel; and our industry is also affected by such

- Economic contracts signed with foreign partners stalled and maybe the contract will not be signed This is really causing losses to both business and bad impact on the long term development of our country

- Deposits in foreign banks and domestic banks will be reduced because the bank interest rates in these countries are declining due to the fact that the country needs easing monetary policies to avoid falling into deep recession

- In Vietnam there are many multinational companies such as Sony, Toshiba, etc These are the companies that their taxpaying contribute significantly to GDP (or government revenue budget) However, these companies have branches in other countries or the parent company in the crisis countries, the subsidiary in Vietnam will also be affected in a bad way so the ability to pay taxes also reduce when doing business is no longer as effective as before

- Our expatriates in the United States, Europe and other countries will have difficulty when the country fell into a recession Foreign exchange cash flow will decline significantly, GNP will decline as well

- The stock markets in the U.S and Asia have already made our country's share price plummet seriously - two times hitting the bottom The global recession will have bad impact on the country's stock market

- World oil prices fell sharply in recent times make government revenue through the export of crude oil was also reduced

- The budget reduction has a lot of impact on the economy because the government will have less money for investment and development spending and public services This is both indirect and direct impact on people's lives

- The projects may be delayed because of the deterioration of the country which Vietnam lent from (because they will limit lending), or may delay the acquisition of ODA

2 Positive impact:

In addition to the negative impact from the global recession, there are also positive aspects of it like rays of light in the dark:

- The country's imports would be more beneficial, because the goods from outside will have lower price than before (the dollar or other currencies decline)

- Decline fuel prices lead to falling commodity prices, thereby stimulating consumption and more consumption will stimulate economic growth

- Offering practical lessons for the Vietnamese economy From this lesson, the Vietnamese economy will have the steps to avoid falling into the "old stories" of the country in recession at the moment

- The banking sector will now be more robust because of the lessons learned from the collapse of major banks around the world which had no small impact on the awareness and experience of the country's banking sector In addition, the merger of small weak banks will bring new life to the banking sector

- Overcoming the recent tough times, our companies have matured a lot as they have had experience dealing with the difficult situation of the market This is very good for the economy of our country because every business is a cell of the society; a healthy body cell makes a healthy economy

- The recession has made other countries slow down their development, this might

be the chance for us to close the developing gap

IV/ SOLUTIONS FOR VIETNAMESE COMPANIES:

1 The solutions of the Government:

- Firstly, continue the implementation of the group of anti-inflation measures,

especially continue the tight but flexible monetary policy, cautious based on market mechanism (not the solution which can shock the market) Effectively use monetary tools with flexible adjustments according to the evolution of the market such as: exchange rates, interest rates, credit…