Banks have received more depositors than borrowers, which officials call a serious sign of economic downturn. Photo courtesy of Tuoi Tre
The economic situation is becoming "very difficult" and the government must "get serious" about finding strong solutions including large spending cuts, said legislators at a meeting Tuesday.
Lawmakers said the government needs to look straight at the gloomy picture to fix it now before it is too late, and many expressed suspicions that some economic figures provided by government ministries were sugarcoated, Tuoi Tre reported.
Vice president Nguyen Thi Doan said that if the government fails to work out strong measures for the economy during this month-long parliament session, "the problem will get more serious."
Doan pointed to credit growth of only 1.4 percent since early this year, compared to deposit growth of 5.5 percent, saying, "the cash flow is frozen, and that is very dangerous."
She said government agencies need to start saving the economy by figuring out how to lift businesses out from underneath piles of debt and help them access affordable bank loans.
A report by the legislature's Economy Committee said the signs of economic downturn are becoming clearer. These include but are not limited to a heavy plunge in consumption, increasing bad debts and inventories, and no improvements to the frozen real estate market and manufacturing sector.
It said tens of thousands of companies have gone bankrupt, while 65 percent of the operative ones are making losses.
Around 15,700 new companies were established during the first quarter this year, down 6.8 percent in number and 16 percent in capital year on year, while 15,300 others dissolved or halted operations, up 14.6 percent.
The legislature's spokesman Nguyen Hanh Phuc also criticized the monetary policies for not being as helpful as they seem to be. "Banks always say that they are willing to lend money, but businesses have complained about various problems because being indebted does not allow them to borrow more, and interest is still very high. So their only choice is to go bankrupt."
Vice president Doan said the country should loosen monetary controls to save businesses, but on the other hand, needs to tighten its belt further in public spending.
"We need to make bold cuts, cancel unnecessary programs. I have noticed waste, overlapping spending, because all government agencies want to hold some money for themselves," she said.
"We need to look straight into the country's difficulties. We need to stop buying expensive cars and making overseas trips."
A government report at the meeting said the state budget received more than VND2.6 trillion last year, the smallest addition in many years, mainly from crude oil revenue and grants.
It forecast a worse ending for this year, as the inflow only met 30 percent of expectations in the first four months.
Minister of Investment and Planning Bui Quang Vinh also admitted at the meeting that without some significant changes in policies, Vietnam will hardly reach its GDP growth target of 5.5 percent set by parliament for this year, following 5.03 percent growth in 2012.
Many legislators demanded that the government be "honest and serious" about economic reports and essentially remove the kid gloves when dealing with the economy.
Assembly chairman Nguyen Sinh Hung said he guessed that hundreds of thousands of businesses have died instead of tens of thousands.
His deputy Huynh Ngoc Son questioned a recent labor ministry report on poverty alleviation, which said the poverty rate has been reduced steadily to around 2.15 million families or 9.6 percent of the country's households.
Son said poverty cannot be reduced easily in such a difficult time while production is suspended and jobs are being lost. "I have made field trips myself and I noticed that poverty has gone up, not down."
Ksor Phuoc, chairman of the parliament's Ethnic Group Council, urged officials to tell the truth for the sake of the economy, instead of throwing out flowery figures "to keep your seats."
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