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MPI outlines next year’ economic scenario

VGP – Việt Nam’s gross domestic product (GDP) would expand at 7-7.5% next year, and the inflation below 8%, according to the Ministry of Planning and Investment’s draft economic scenario.

September 09, 2010 5:39 PM GMT+7

Vietnamese economy is projected to continue taking off in 2011 though it still faces hard challenges if it is not well-prepared – Illustration photo

Under the scenario, all key economic sectors would maintain their high growth momentum. The added value of agriculture, forestry, and aqua-culture sector is projected to increase by 2.8-3%, industrially-construction sector up 7.5-8.2%, services 8.2-8.5% compared to 2.6%, 7.6%, 7.5% this year respectively.

However, the MPI still keeps cautious eye on some macro indicators.

Budget overspending at 5.5%

The Ministry estimates that next year’s total budget collection will reach some VND 612.1 trillion, up 16.7% against this year’s figure and equal to 26.7% of the GDP.

The State budget will mainly depend on domestic resources of income, instead of export of crude oil and non-refundable aid.

Meanwhile, the Government’s expenditure is forecast to increase 17.5% against 2010, to VND 735 trillion. The MPI estimates that the overspending rate would go beyond the target of 5% in 2011.

Investment exceeds savings

The total social investment capital in 2011 will be about VND 930 trillion, an increase of 16.3% compared to 2010, or accounting for some 41-41.5% of the GDP. Meanwhile savings dips to about 27.9% from 30.4% in 2010. Thus, the investment burden would exceed the economy’s capability.

The foreign direct investment inflow is projected to rise 15.5%, equivalent to VND 198.6 trillion, accounting for 21.4% of the total social investment capital.

The capital shortage means higher tax against high income groups.

The State’s development credit will be about VND 65 trillion, up 18.2%.

In short, the expansion of the national economy will mainly rely on the increase in capital.

Trade deficit at US $14.5 billion

The MPI calculates that next year’s total trade turnover may reach some US $74.25 billion, up 10% against 2010. The import value will stand at US $88.8 billion and the excess of imports over exports is projected at US $14.5 billion, equivalent to 19.6% of the total export turnover.

Next year’s higher trade deficit will surely affect the exchange rate at certain time and lead to rising inflation and higher interest rates.

Payment balance: US $500 million in surplus

The current account deficit is projected to be US $10.9 billion as the balance of trade suffers an estimated deficit of US $9.51 billion. The deficit in services sector may be US $1.75 billion, and in investment income US $5.12 billion. However, money transfer is expected to have a surplus of US $5.5 billion.

These deficits can be compensated with the capital account surplus of US $11.8 billion, leading to some US $500 million surplus in the overall balance of payment, according to the scenario.

Unstable electricity balance

To reach the growth rate of 7-7.5%, the real electricity demand will rose by 14-15% next year, which means that the country will have to import some 700MW and 250MW from China and Laos respectively.

If power producing and purchasing plans go smoothly, electricity concern would be removed. However, only an electricity project is delayed, the supply will be unstable, the MPI asserts.

By Hải Minh