A newly released report says Vietnam's economy will remain sluggish this year with a GDP growth rate of between 5.04 and 5.35 percent, lower than the target of 5.5 percent.
Vietnam's GDP growth rate was 5.03 percent last year, much lower than the target 6-6.5 percent.
The report, which will be published fully next month, also forecasts Vietnam's inflation rate at between 4.95 and 6.64 percent.
The initial findings of the 2013 Annual Economic Report prepared by the Vietnam Centre for Economic and Policy Research was released last week.
Nguyen Duc Thanh, director of the center under the Vietnam National University, said the economy will continue to remain stagnant this year as businesses struggle and government policies fail to address the problems effectively.
He was quoted as saying by online newspaper VnExpress that the tight monetary policy has weakened consumers' purchasing power, and shrunk businesses' investment as well as the government's spending.
Vietnam's consumer price index dropped 0.06 percent in May and will possibly continue going down in June, Thanh said.
Inflation will likely reach negative levels in the second quarter and will slightly increase in the second half of the year thanks to seasonal buying trends, but the rise will not be comparable to those of previous years, the economist said.
He expressed his concerns over the likelihood of deflation, saying that the number of businesses getting out of the market has reached the tens of thousands, which "has never happened before."
According to the Ministry of Planning and Investment, 23,200 businesses have suspeneded operations, dissolved or gone bankrupt so far this year.
In a recent interview with VnEconomy, Tran Hoang Ngan, a member of the National Assembly's Economic Committee, also said Vietnam's current economic situation is "extremely difficult and worrisome."
Bankruptcies and closures among businesses have become "an epidemic," he said, quoting official figures as saying that 43,000 businesses closed down in 2010, over 53,000 in 2011, and over 54,000 last year. Corresponding figures for the first three months of the year were not encouraging at around 20,000, he said.
Meanwhile, the agriculture sector, which has been the economy's backbone for many years, saw a growth rate of 2.24 percent in the first quarter, which was the lowest since 2010, Ngan said.
"The signs of a downturn are very clear," he said.
Ngan urged the government to take "stronger" actions to kickstart the troubled economy. He said policies issued so far did not reflect a "complete awareness of the situation," and hence were not very effective.
Vu Viet Ngoan, chairman of the National Finance Supervisory Committee, was quoted by VnExpress as saying excessive attention to inflation control has played a part in the economic downturn, and will possibly lead first to a supply-demand imbalance and then inflation caused by insufficient supply.
To avoid a "not so bright future," Ngoan said, Vietnam needs to apply inflation control and growth stabilization policies "harmoniously," calculating the "price to pay" for tight measures before deciding whether or not to continue tightening or loosening them.
He also advised authorities to concentrate on supporting businesses as a short-term solution, amd restructure the economy and improve the business environment as middle and long term solutions.
Previously, speaking to the press, Dao Van Hung, director of the Academy of Policies and Development, said with "very stagnant" production, businesses are in need of urgent responses from the government.
He said the most effective solution would be to increase the government's spending and raise the national debt ceiling.
According to the government's latest report, Vietnam's public debt-to-GDP ratio now is about 55 percent.
A stimulus package of VND100-200 trillion (US$4.69-9.39 billion) is also needed to rescue businesses, Hung was quoted as saying.
Like us on Facebook and scroll down to share your comment