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2008: the global financial crisis is likened to the Great Depression

1929-1933. Particularly in Vietnam, contrary to the overheating situation at the end of 2007,

In early 2008 and from the last 6 months of 2008, the economic situation fell into recession. Speed

Economic growth in 2008 was only 6.2% compared to 8.5% in 2007. This is an increase

the lowest growth since 2000; Growth in the fourth quarter of 2008 only reached 5.7% compared to 6.5%
of the three

First quarter of 2008. Export turnover in 10/2008 decreased by 3.3% compared to September and May

11 decreased by 4.4% compared to October.

2009: firstly, unemployment due to job cuts is very common in these regions

industrial zone in late 2008 and early 2009. But less in the form

for public leave without signing the contract, encouraging self-employment. TB

more seasonal jobs or short-term contracts lose jobs. Many businesses are difficult

Towel in compliance with social insurance policies and new unemployment insurance system

applied. Businesses recorded recovery in production, workers can only

Calculate normal working hours and shift work, no overtime and this makes them

spending must be cut, especially in HCMC and surrounding areas, due to high living costs.

Followed by the situation of registered FDI decline also seriously, the first three months

in 2009 only earned $ 2.1 billion in FDI, a 70% decrease compared to 2007.
IICompare the stimulus policy of Vietnam, China and America

The feature of the stimulus package of the Anglo-American bloc was born after a bailout of the banking
industry. Due to the global financial crisis that started from the developed countries, especially
impacting on the financial markets in the UK - US, these countries must choose the solution to rescue
the damaged business Heavy losses first and hope to mitigate its spread effects. After temporarily
normalizing the operation of the banking sector, these countries have just launched their economic
stimulus program. Characteristics of this stimulus package are aimed at stimulating domestic
consumption demand, focusing on reducing tax lines (personal income tax, value-added tax, delaying tax
payment for enterprises ...).

In general, American and European economic stimulus packages are aimed at maintaining job
regeneration - the market is heavily impacted in crisis and affecting aggregate demand, trying to
stimulate individuals. . Direct tax subsidies for businesses account for a very small proportion of this
economic stimulus package. It can be called, this is a school of direct consumer demand stimulus (before
this stimulus package, the US has launched a demand stimulus program to beat old cars to buy new cars
- clash for clunkers).

Chinese stimulus is a huge infrastructure system reconstruction program. The largest part of the
stimulus program is the World Bank (WB) estimated at US $ 586 billion (about 12% of China's 2009 GDP)
aimed at building transport infrastructure systems (in which the programs building very impressive train
routes with Western countries), construction of rural infrastructure, reconstruction after earthquakes.
The rest of this stimulus package is aimed at improving technology, housing construction, improving
health, energy and environmental systems. This stimulus package does not go directly to supporting
businesses, but it does not go directly to raising domestic demand, but rather to spend on large
infrastructure projects and the benefits will shift into fast businesses. than.

The outstanding feature of Vietnam's stimulus package lies in two interest rate support packages. The
stimulus package of Vietnam also has similarities with the Western stimulus package, which is tax
support (according to the World Bank's estimation, the tax support package for enterprises is worth
9.900 billion dong, twice higher than the support for the income tax. enter individuals). Although not
explicitly stated, many of Vietnam's economic support items in 2009 were also aimed at a number of
infrastructure types, such as 2010 budget advance for a number of projects and transfer of investment
from 2008 plan to 2009. However, the most prominent and the biggest impact on Vietnam's economy is
still the two interest rate support packages of Vietnam, in which the story of VND 17,000 billion supports
4% for short-term interest rates. (It is estimated that when it is issued, it will create a credit of VND
600,000 billion for the economy), which attracts many arguments of Vietnamese economic experts,
including the idea that this is a supply stimulus. not stimulus. This is demand stimulus through interest
rate subsidy or interest rate subsidy (WB uses the word "subsidy rate" to talk about this program). The
notable feature of this stimulus package is the combination of fiscal expenditure (to subsidize prices)
with monetary policy - because it seems to have reduced the effective interest rate of loans from
businesses to a level of 4%. Moreover, a policy of reducing interest rates in the business sector and not
the whole economy - at the same time the interest rate support comes from foreign exchange reserves
and not the budget.

The demand stimulus model of Vietnam also has a noticeable feature: the Government's commercial
loan of 1 billion USD through the issuance of international bonds and then reallocated to the state-
owned enterprises (SOE). This measure has created two consequences: multistage interest rate support
for SOEs (both leading to restraint of the financial system and leading to the dependence of the SOE
sector) and creating crowding effects (crowding out) for the private sector.

The result of this policy is that the private sector will be crowded out of some investment sectors
because they must receive higher interest rates than the SOE sector. Moreover, the international bond
issuance channel is the capital support channel and long-term interest rate, so this effect of
encroachment is worrying. When the economy recovers, the private sector is still affected by this
crowding effect, which will cause private spending and investment to recover slowly in some areas.

Differences: choose tactics according to your strength

The British-American stimulus model follows a bailout of the banking system, in which the US banking
sector bailout amounted to $ 700 billion. After that, this system just started the economic stimulus
package. Meanwhile, the model of the Vietnam-China group is without a bank support package. The
reason is that the financial crisis does not directly affect the banking group in Vietnam and China, the
bank does not suffer losses due to secondary debts and financial investments. The crisis in the United
States first threatens the stability of the financial system, contributing to economic instability, so the US
must solve this problem first. Next they have to increase the total domestic demand and create new
jobs because the total decline in demand is the reason for the weakening of the US economy.

China has chosen to invest in infrastructure to boost demand because it chooses to rely on domestic
demand to overcome crisis and not choose to rely on foreign demand too much to stimulate growth in
the urban context. The world export market is deteriorating. According to the World Bank data,
domestic demand has contributed largely to support China's economy to achieve impressive growth in
2009, in which investment in government infrastructure projects plays a major role to boost growth.
Chief. Chinese data show that while employment continues to worsen in the export sector and is also
bleak in the industrial sector (due to a number of industries such as cement, iron and steel, aluminum
has surplus signs). excess capacity and force the government to "intervene"), new jobs are created in
the service, construction and state sectors. Obviously in 2009, China used economic stimulus towards a
huge expenditure on infrastructure projects to create jobs and support growth. From the perspective of
creating new jobs directly through government spending programs, we find similarities in China and the
United States.

Meanwhile, Vietnam's growth model is heavily influenced by foreign aggregate demand because of its
high dependence on exports, so Vietnam itself does not choose to increase domestic aggregate demand
but to maintain the factor. The government considers it important for the economy to be domestic
manufacturing enterprises (which are not least SOEs) and enterprises that aim to export.
IIIWhy does Vietnam not implement demand stimulus policy 2?

As with the impact of the East Asian financial and monetary crisis in 1997-1999, Vietnam's tendency to
reduce growth and macroeconomic imbalance under the impact of this crisis was inherent. revealing
from before the crisis really impacted on the economy.

That means, the current difficult situation of the economy is rooted in internal weakness, not necessarily
caused by negative external impacts. We also note that the external crisis has a significant negative
impact on the economy which is as large and vulnerable as Vietnam.

However, it does not determine that situation but only serves to make the situation more serious due to
internal weaknesses.

In short, before we offer the stimulus package, the economy has "hit the bottom", and by law it will go
up on its own. Therefore, the stimulus package plays a role in helping the economy recover better
growth on the momentum of growing.

In fact, despite being weakened after two years (2007-2008) to cope with declining growth and macro
instability, the economy still has a strange capacity to counteract negative impacts. of the global crisis of
"a hundred years to have one".

However, under the strong impact of the crisis, the growth decline process is not prolonged and not too
serious, the rapid recovery before the stimulus package is implemented.

This shows that the accuracy of forecasting and assessing the level of crisis impact on our economy and
the severity of the situation made in late 2008 and early this year is quite "heavy" and much more
pessimistic than reality.

Thus, it can be said that the role of the stimulus package has been implemented is very important but
not as big as expected.
No proper stimulus package yet

But many experts still believe that, without the first stimulus package, businesses and the economy have
sunk into crisis?

If to talk about the effects of the first stimulus package, it is also necessary to analyze the structure, to
clarify the real impact of specific components. In terms of nature, it is possible to divide the first
stimulus package into 4 components or 4 small packages, including: 4% interest rate support package,
consumer support package, investment support package and investment package. basic construction.

In the above four packages, the fourth largest package is almost never implemented due to a number of
specific causes. Package 2 and package 3, more or less have a positive impact but are not strong. That is
not to mention that some of them have specific packages, which are almost ineffective, even causing
adverse reactions (for farmers to borrow agricultural machinery and equipment without interest).

Thus, it can be said that the strongest impact of the first stimulus package is focused on the 4% interest
rate loan package. However, in essence, this is a "rescue" package rather than a stimulus package. This
package has freed many businesses to escape the "congestion" situation of capital circulation due to bad
debt burden. It has the effect of "activating" the economy, helping businesses and banks escape "dead
spots", meaning that it has fulfilled its mission.

This shows that, in the past period, for the economy to recover growth, the rescue package plays a
major role. And the proper stimulus package has not been effective. The economy almost automatically
restores growth after escaping from the "bottleneck" point with just a moderate amount of money
released (basically not a demand stimulus).

The above practical situations show that, it seems that the economy does not necessarily continue to
stimulate demand in 2010 but the economy can still maintain the trend of improving the growth rate.

Moreover, the recent G20 Conference has concluded: the crisis has bottomed out, the world economy is
on the recovery momentum.
However, for Vietnam, along with the above analysis still need some more arguments and forecasts
before giving clearer suggestions about the "fate" of the stimulus package.

Should focus for restructuring

But many believe that there should continue to be a stimulus package that acts as a "stepping stone" to
help the economy land more safely?

Please note that it is necessary to consider the short-term and long-term benefits of continuing to
implement the second stimulus package. Until now, the basic arguments are almost inclined to the non-
continuation orientation in 2010.

In my opinion, the arguments on "stepping stone", on the need to "avoid shock" for the economy by
maintaining a certain demand stimulus, smaller volume, lower preferential interest rates, conditions
more stringent ... proved unconvincing.

The economy with more than 95% of small and medium enterprises, 70% of rural workers, big
businesses still unscathed so far self-proclaimed that it has the capacity to rise even when the
Government Government did not continue the stimulus package.

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