Vietnam's financial watchdog has warned that the local economy is grinding to a standstill, with more people making bank deposits than business investments.
A regular report by the National Financial Supervisory Commission issued in June noted that Dong deposits expanded 7.1 percent during the first five months of this year, despite cuts in the deposit rate--from 7.2 to 6.4 percent a year.
Credit growth in dong was reported at a mere 1.1 percent, halved year on year, dropping the loan-to-deposit ratio from 82.4 percent in late last year to 79 percent in May.
The report, cited by news website Thoi Bao Kinh Te Saigon (Saigon Times), said consumption has not improved.
Private investments in the first half this year dropped to 10.3 percent of the GDP (from 11.1 percent during the same period last year) while total investments rose from 29.6 percent to 30.2 percent of GDP.
Foreign investors also showed signs of backing off, partly due to anti-China riots that destroyed factories flying Chinese flags (many of them with Taiwanese owners) in southern and central Vietnam in May, according to the findings.
New investments registered so far this year dropped 35.3 percent year on year while disbursed funds rose at a modest 0.9 percent from January to June, compared to the 5.6 percent increase during the first half of 2013.
The committee said the government needs to adjust its macro-economic policies in the second half of the year to focus on stimulating consumption and investments, like cutting prices on necessities, the news site reported.
State investments need to be disbursed quickly, it added.
The report offered a gloomy economic forecast, citing a 16.2 percent increase in business shut-downs and suspensions--compared to the first half of 2013-- and a 4.1 drop in the opening of new businesses.
Though the report acknowledged that the economy grew at a faster pace than during the first half of the two previous years (5.2 percent from 4.9 percent), major industry grew slowly at 4.1 percent (compared to last year’s 4.6 percent).