The Minister of Investment and Planning has warned that Vietnam's GDP will take a tumble in 2015 due to the falling global price of crude oil.
Bui Quang Vinh told news website Thoi Bao Kinh Te Saigon (Saigon Times) Online that Vietnam’s growth is built on several pillars including its natural resource exports, particularly crude oil.
Vinh said each US dollar drop in the per barrel price of crude oil will mean a concurrent drop of between VND1-1.2 trillion ($46.76-56.11 million) for Vietnam’s state budget.
So far, he anticipates the global price drops will eat around $3 billion of Vietnam’s revenue.
A government report to the National Assembly, Vietnam's legislature, predicted Vietnam's GDP would grow by 6.2 percent in 2015, based on a crude oil price of $100 a barrel.
But Vietnam has been selling its crude for around $60 a barrel; prices have dropped as low as $55. Vietnam's economy is expected to grow more than 5.9 percent this year, quickening from 5.42 percent in 2013.
Vinh said Vietnam may have to reduce its drilling activities to stave off losses.
But even that entails risks.
“If we reduce our oil output by 30 percent, for example, GDP growth could fall by 0.8 to 1.2 percent next year,” he said.
The government has established a special team that includes members of Vinh’s ministry, the Ministry of Finance, the Ministry of Industry and Trade and the Central Bank to explore how fluctuating commodity prices will impact the economy.
Vinh said the agencies have been keeping a close watch on oil prices to make smart decisions about how Vietnam should manage extraction and exports to maintain a healthy budget.
But Vinh said the falling oil prices have also brought “microeconomic” benefits--namely a cheaper source of imported fuel.
Retail gasoline and diesel prices fell around five different times in the past four months, saving everyone money.
Vinh said the prices will continue to fall for some time.
“Transportation costs have fallen, the cost of doing business less expensive making enterprises more competitive,” he noted.