Vietnam will not be able to limit its budget overrun to 4.8 percent as targeted this year because revenues have been lower than expected, experts say.
"I don't see any source for increasing state budget collection, as tens of thousands of local firms have shut down their business," economist Bui Kien Thanh said.
And while many foreign invested enterprises are doing good business, they enjoy tax incentives, which means their contributions to the state budget will not be large, he said.
The Ministry of Finance estimates state budget collection for the year's first half at VND356.5 trillion (US$16.98 billion), equaling 43.7 percent of the annual target, compared to 52 percent, 53 percent and 45 percent for the same period in 2010, 2011 and 2012 respectively.
State budget spending for the same period is estimated at VND448.9 trillion, raising the budget deficit to nearly VND92.4 trillion, equaling 57 percent of the budget deficit planned for 2013.
The Hongkong and Shanghai Banking Corporation Limited (HSBC) said in a recent report that slower growth has hurt revenue collection, especially in corporate tax, value added tax and import and export duties.
According to the Ministry of Planning and Investment, more than 24,000 enterprises shut down their business in the first half of this year.
Economist Thanh said the central bank should not issue more bonds. This should be done to force commercial banks into boosting lending for business instead of purchasing bonds as a "safe harbor." When capital is directed to production and consumption, state budget collection would improve, he said.
The government plans to sell bonds worth VND170 trillion this year.
The state should not borrow more foreign loans to develop public infrastructure in the hope that the investment in such works will create more jobs and help spur consumption, he said.
While many countries have done it during an economic recession, it also carries the risk of rising bad debt. "We can see that in the case of Greece," he said.
Vietnam's banks have estimated bad debt at 4.51 percent of total loans as of the end of March, Deputy Prime Minister Nguyen Xuan Phuc said on May 20. That figure compares with the central bank's estimate of 7.8 percent at the end of 2012.
Bui Kien Thanh said the state should facilitate more firms in accessing bank loans. Banks in other countries offer loans based on the feasibility of projects and repayment capacity, but local banks have not done that. They have operated like pawnshops, he said.
They have not focused on assessing projects before lending, just lent to firms based on mortgaged assets. Thus, many firms cannot access new loans because they do not have new assets to mortgage.
In addition, interest rates should be cut further, and the bad debts problem resolved, he said.
Economist Vo Tri Thanh said that "in the current situation, meeting state budget collection targets and limiting overspending is a big challenge."
The government should accelerate capital disbursement to big state-invested projects, improve the business environment and help firms get rid of big inventories, he added.
Vietnam's GDP grew by 5 percent year-on-year in the second quarter of this year, up from 4.8 percent in the first quarter, HSBC said.
"For the year, we expect the economy to accelerate only slightly by 5.1 percent from 5 percent in 2012."
"Thus, without necessary reforms to resolve major bottlenecks in the economy, including an inefficient banking system and a state-owned sector, Vietnam will likely underperform in the coming decade," it noted.
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