PHÂN TÍCH TÌNH HÌNH KINH tế xã hội VIỆT NAM THỜI GIAN QUA en

FOREWORD
According to the World Bank (WB), 2012 was a difficult year of the world
economy and it was forecasted that the global economic crisis will reach its peak in
2013; it was also warned that countries need to prepare to deal with this risk, especially
the protection of the most vulnerable groups, the poor, as well as maintaining stable
economic growth. As a leading global consultant – the consulting firm McKinsey &
Company has studied and assessed the overall impact of the global recession on
Vietnam's business environment to advise clients about their need to have reasonable
plan and business strategy to reduce risk to the lowest level.
I/ RECENT SOCIO-ECONOMIC SITUATION IN VIETNAM:
According to the Government's report on the socio-economic situation in 2012 at
the fourth session of the National Assembly XIII on October 22nd, 2012, in the context
of world economic fluctuations are more complex and difficult, there was a sharp
decline in trade, the global growth was lower than expected this year, which created the
negative impact on the deeply integrated and highly open economy such as ours. The
socio-economic results of the first 10 months of 2012 are as follows:
1. Achievements:
a) In terms of inflation control, macroeconomic stabilization and difficulty
solving for businesses:
- The inflation was initially controlled, with consumer prices is up 5.13% in 9
months. In the last months of the year, we will take measures to keep annual inflation
rate at about 8%.
- Exports rose 18,9% to 83,79 billion U.S. dollars, imports rose 6,6% to 83,76
billion US dollars, the international balance of payments got a surplus of $ 8 billion.


The budget revenue got 67,3% and expenditures reached 71,2% of the estimate. The
total capital investment in social development was estimated at 29,5% of GDP
(compared to 34,6% in 2011).
- Industrial production increased over each quarter. The 9-month industrial
production index rose 4.8%, with an estimated annual increase of 5.3%. Agricultural,

forestry and aquatic production continued to grow and play a very important role in the
economic stability of the rural area.
- Economic growth in 9 months was 4.73%, estimated at about 5.2% for the whole
year, lower than planned but the later quarter is higher than the previous quarter,
inflation was controlled, macro-economic situation was more stable, which are the good
signs for sustainable development in the future.
b) In terms of restructuring the economic structure and reforming the growth
model:
- Continue the economic restructuring scheme including restructuring state-owned
enterprises, restructuring of financial markets, banking and investment based on the
spirit of the Central Resolution 3 (XI), consider these as the important content in the
overall restructuring.
- Implement the restructuring of commercial banks, especially the weak banks,
along with the processing of bad loans. Implement the restructuring of corporations,
state corporations by focusing on the main business, with suitable size for the market,
management capability and financial capacity.
c) In terms of ensuring social benefits:
The government has focused on the implementation of synchronous programs,
social policy, focusing on job creation, income generation and poverty reduction. The
annual estimated poverty rate fell 1.76%. Even though it did not reach the planned rate
of 2%, but in difficult economic conditions, this is a great effort. We have created 1.13
million new jobs, estimated at about 1.52 million for the whole year...


d) In terms of developing the culture, education, technology, and environment
protection:
Culture, sports continue to be focused, associated with the implementation of the
campaign to build cultural life and the new rural construction program. There was the
project development of science and technology to form the basis of implementation of
strategic breakthrough in the development of human resources, restructuring and

growth model transformation. Scientific research activities achieved positive results.
Some research has practical and scientific value and practical contributions to the socioeconomic development. The level of technology in a number of areas such as
electronics, information technology, oil and gas equipment manufacturing ... was
enhanced.
e) In terms of administrative reform, anti-corruption and saving practices:
- Administrative reforms continue to be implemented synchronously in terms of
institution, personnel organization, government administrative and financial procedures,
especially in budget revenues and expenditures, capital allocation, financial mechanism
with the public service units such as health, education, science and technology...
- The prevention of corruption continued to be focused in direct association with
the implementation of the Central Resolution 4 (XI). We have reviewed the
implementation of Resolution 3 and Central Anti-Corruption Law. We enhanced the
supervision, inspection and coordination of the agencies in the fight against corruption
and waste. Focus on direct handling of corruption cases.
f) Enhance the foreign affairs activities, ensure the country defence, and
stabilize socio-economy:
- We have implemented many solutions which are consistent and timely solved
arising issues, maintained socio-political stability and independence, national
sovereignty.


The national defense posture and the people's security were enhanced. Armed
forces continued to be built in the direction of revolutionary, regular, elite, modern step
by step. The defense capability and industry were raised. There was a closer link
between economic development and strengthening national defense and security.
The prevention of crime and ensuring public order and social safety was enhanced
and there are positive changes. We have destroyed many large-scale crime institutions,
especially drugs and trafficking. We have strengthened communication and education
about juvenile crime prevention. Traffic order and safety are focused directly; the
number of accidents was reduced greatly, in terms of the death toll and injured...

2. Limits and weaknesses:
- Unstable macro-economy, inflation remains at risk of rebound. Bad debts
increase and handling is slow and difficult. Companies still had to deal with many
difficulties, can’t access the capital, big inventory. Stagnant real estate market is not
likely to recover soon, which creates many potential risks.
- Some corporations, state corporations operate ineffectively, illegally, causing
great loss of state assets. The quality, efficiency and competitiveness of the economy
have not improved much. The economic and social forecasting capacity is still restricted
and doesn’t meet the requirements.
- The life of a part of the population, especially in remote areas and ethnic
minorities, got more difficult. Due to limited resources, the expansion and improvement
of the level of support of social welfare policy, poverty reduction programs, new rural
construction, job creation and wage reform did not meet the requirements.
- Education and training is still weak; the quality of training of many universities,
colleges was slow in improving; Science and technology couldn’t meet the
requirements in terms of productivity, quality and economic competitiveness
improvement.


- The management of natural and environmental resources was still inadequate;
there were a lot of pending big projects. The environmental pollution in industrial parks,
manufacturing facilities, villages, river basins was still heavy. The flooding in some
major cities was slowly to be overcome.
- There was still some disappointment about the social order and safety; especially
crime, social phenomena, traffic law violations, food safety...
- Administrative system reform did not meet the requirements. Many
administrative procedures are no longer appropriate and slow to be changed. The
administrative discipline inspection and supervision was still weak, reducing the
effectiveness and efficiency of management and administration. A part of the
government officials turned into bad and failed to fulfill their responsibility, which

created harassment and the negative impact on the trust of the people.
II/ THE CURRENT GLOBAL DEPRESSION:
1 – The government debt crisis in Europe:
- The European government debt crisis is a debt crisis first bloomed in Greece in
early 2010 when the cost of government debt increased continuously. The crisis then
spread to Portugal, Spain, followed by Italy in the Euro area. France is a country with
high risk of falling credit ratings; the Republic of Cyprus has been pushed to the brink
to get bailout.
- On 2/5/2010, the member countries of the euro zone and the International
Monetary Fund have approved a loan of 110 billion euros for Greece, provided that the
country must implement tough austerity measures.
- On 09/05/2010, the European Minister of Finance has approved the rescue
package worth 750 billion Euros in order to ensure financial stability in the Euro zone,
and set up the European Financial Stability Committee. Followed by a 85 billion Euro
bailout package for Ireland in November 2010 and 78 billion Euros for Portugal in May
2011. The debt crisis has threatened the existence of the euro currency, influenced the


global financial system, and made the Greek Prime Minister and the Italian Prime
Minister to resign. On 06.02.2012 the Government of Romania is the 6th European
government collapse due to debt crisis.
- According to statistics published on 15.11.2012, in the third quarter of this year,
the gross domestic product (GDP) of the Eurozone fell by 0.1%, after 0.2% in the
previous quarter. Thus, according to the economic definition, the Eurozone is officially
in recession by the two consecutive quarterly decline. If compared with the same period
last year, the GDP of the Eurozone fell 0.6%, the overall European Union (EU) fell
0.4% before a possible slightly increase by 0.1% in 2013.
- European Central Bank (ECB) also warned that monetary union could face the risk
of more serious crisis to decline 0.5% this year and 0.3% for 2013.
- The statistics said that in the last quarter, Germany - the number one economy in

Europe - only had modest growth of 0.2%, lower than the 0.3% in the second quarter
and 0.5% in the first quarter. France is also struggling to achieve growth of 0.2%.
Although the German and French economies continue to grow, but when considering
all 17 member economies, the eurozone still has fallen into deep recession.
- The "modest" Growth of Germany, France, could not pull the Europe ship
accelerate as the economy of the Netherlands, Spain, Italy and Austria all decelerate. In
the third quarter, the economy of Spain and Italy - the countries imposing the unpopular
measures to "tighten their belts" - fell by 0.3 per cent and 0.2 per cent. Meanwhile, the
Austrian economic decline 0.1%, Netherlands fell 1.1%, the deepest decline in
Eurozone.
2 – The government debt crisis in the US:
- The Credit rating agency S & P has cut the U.S. AAA credit rating to AA +
rating, due to concerns about the budget deficit, which raised the debt ceiling of the
world's largest economy. This is the first time since 1941 to date, a statement of the S &
P has created an economic shocks, threatening bankruptcy in the United States (the


volume of government bonds in the United States is up to 9340 billion; the government
debt, based on the debt meters, has reached more than 14,000 billion), even though the
debt problems of the countries of the European Union (EU) has not been resolved.
- Insolvency stories happened right after the world economy showing signs of
recovery from the financial and economic crisis in 2008, starting from a number of
countries of the European Union. As of 2010, the U.S. public debt reached 90.4% of
GDP, the general level of the EU is 80.3%, of which Greece: 123%; Italia: 127%;
Ireland: 142%. Japanese with the record high: 197% of GDP. Up to the present time,
these indicators are higher.
- When more than 70% of U.S. Treasury bonds held by outside private investors
matures after 5 years, the poor investor confidence in the United States will cause
interest expense for the government and the private sector of U.S. increased.
- Total U.S. government bonds held by China in January fell by $ 5.4 billion, to $

1.155 billion, down continuously for three consecutive months. In December last year,
China sold a net $ 4 billion of U.S. government bond.
- The foreign central banks hold $ 3,150 billion U.S. government bonds out of $
4440 billion in circulation abroad.
- The investment fund of Jim Rogers, the president of Rogers Holdings and Beeland
Interests, Inc. also decided not to continue lending money to the U.S. government
again...
- Recently, the problem of public debt has put the U.S. government onto the
"thousand pounds hanging by a thread" situation into the state of inability to pay debts bankruptcy. The story seemed to have finished on the agenda of the Senate and the U.S.
House of Representatives, but the debate and discuss of solutions to overcome, or at
least re-evaluate the impact of the debt crisis still continue.
- Canada's Financial Post dated 22/08/2012 commented that the U.S. debt crisis is
still large and dangerous for the world economy more than the European debt crisis


because the European Union(EU) are solving their financial crisis, while the U.S.
appears to be paralyzed.
III/ THE IMPACT OF THE GLOBAL RECESSION ON VIETNAM:
The recession of the world economy is having a strong impact on Vietnam,
including both positive and negative, expressed by some aspects as follows:
1. Negative impact:
The world is now faced with the economic downturn, reduced energy demand in
major markets such as the U.S. and Europe. In addition to energy, the demand for
essential products also decreased due to the fact that the economy has fallen into this
predicament. The world economic downturn has some impacts on Vietnam as follows:
- Decreased export: Because the country's major export market is the United States
and Europe, so when the market falls into recession and difficulties, the demand will
decline. The reduced demand will make the export of our products in these markets be
less, and will create a bad impact on GDP (down).
- The development cooperation between Vietnam and foreign partners – which are

affected by the crisis - will be interrupted or halted due to the financial difficulty. This
negative impact affects the project or investment in our long-term development.
- The fact that U.S. fell into recession created the dollar depreciation on the
international market, which is by no means, a small impact on export. Due to dollar
devaluation, export is not as profitable as before ($ 1 USD in exchange for less VNDs).
Thereby it reduces the country's GDP.
- Tourism: The smokeless industry is not immune from the impact. When the
country is in depression and crisis, its people will limit their consuming and be reluctant
to travel; and our industry is also affected by such.


- Economic contracts signed with foreign partners stalled and maybe the contract
will not be signed. This is really causing losses to both business and bad impact on the
long term development of our country.
- Deposits in foreign banks and domestic banks will be reduced because the bank
interest rates in these countries are declining due to the fact that the country needs
easing monetary policies to avoid falling into deep recession.
- In Vietnam there are many multinational companies such as Sony, Toshiba, etc.
These are the companies that their taxpaying contribute significantly to GDP (or
government revenue budget). However, these companies have branches in other
countries or the parent company in the crisis countries, the subsidiary in Vietnam will
also be affected in a bad way so the ability to pay taxes also reduce when doing
business is no longer as effective as before.
- Our expatriates in the United States, Europe and other countries will have
difficulty when the country fell into a recession. Foreign exchange cash flow will
decline significantly, GNP will decline as well.
- The stock markets in the U.S. and Asia have already made our country's share
price plummet seriously - two times hitting the bottom. The global recession will have
bad impact on the country's stock market.
- World oil prices fell sharply in recent times make government revenue through the

export of crude oil was also reduced.
- The budget reduction has a lot of impact on the economy because the government
will have less money for investment and development spending and public services.
This is both indirect and direct impact on people's lives.
- The projects may be delayed because of the deterioration of the country which
Vietnam lent from (because they will limit lending), or may delay the acquisition of
ODA.
2. Positive impact:


In addition to the negative impact from the global recession, there are also positive
aspects of it like rays of light in the dark:
- The country's imports would be more beneficial, because the goods from outside
will have lower price than before (the dollar or other currencies decline).
- Decline fuel prices lead to falling commodity prices, thereby stimulating
consumption and more consumption will stimulate economic growth.
- Offering practical lessons for the Vietnamese economy. From this lesson, the
Vietnamese economy will have the steps to avoid falling into the "old stories" of the
country in recession at the moment.
- The banking sector will now be more robust because of the lessons learned from
the collapse of major banks around the world which had no small impact on the
awareness and experience of the country's banking sector. In addition, the merger of
small weak banks will bring new life to the banking sector.
- Overcoming the recent tough times, our companies have matured a lot as they have
had experience dealing with the difficult situation of the market. This is very good for
the economy of our country because every business is a cell of the society; a healthy
body cell makes a healthy economy.
- The recession has made other countries slow down their development, this might
be the chance for us to close the developing gap.
IV/ SOLUTIONS FOR VIETNAMESE COMPANIES:

1. The solutions of the Government:
- Firstly, continue the implementation of the group of anti-inflation measures,
especially continue the tight but flexible monetary policy, cautious based on market
mechanism (not the solution which can shock the market). Effectively use monetary
tools with flexible adjustments according to the evolution of the market such as:
exchange rates, interest rates, credit…


- Secondly, strengthen the supervision of the Government for the financial system,
banks and the stock market. Review and change the financial and banking system into a
healthy one. Review of bank lending to the real estate sector and the high-risk projects.
- Thirdly, boosting production, agricultural policy support to overcome the
consequences of floods, support people in food production, support poor people in
remote areas, creating conditions favorable to businesses to do business effectively.
Create policies for corporate income tax exemptions, especially for small and medium
businesses, reduce import tax schedule, especially consumption tax and value added tax
on imports in case of high inflation and economic downturn. Concentrate in removing
difficulties; create conditions to promote production and business activities in the last
months.
- Fourthly, continue strict policies on government spending and public sector
investment in order to avoid the risk of budget deficits. The tightening of government
spending and transferring investments to the private sector will contribute to the
regional tax breaks for business and personal income tax.
- Fifthly, reform and solve the problems related to administrative procedures,
clearance, approval and disbursement of project to facilitate the project, so that the
program is implemented rapidly, especially for the construction companies.
- Sixthly, diversify the export markets to avoid the slowing down impact from
reduced U.S. imports and some suffered countries in the financial crisis, the world
credit market and enhance the new navigation to expand the domestic market. Apply
policy measures to encourage the development of manufacturing exports, increase

exports and reduce the trade deficit. Implement flexible exchange rate regime to support
export credit and increase incentives for export production.
- Seventhly, closely monitor the foreign investment into the country, continue to
improve the investment environment, promote foreign investment promotion, including
monitoring the implementation of foreign direct investment projects apart from the U.S.
and European countries to be able to support as needed.


- Eighthly, organize, administrate and monitor to ensure the smoothness of retail
establishments in the country, prevent creating speculation, congestion, and scarcity of
goods. Reasonably encourage consumption while early raising the minimum wage for
civil servants and workers in state enterprises.
- Ninthly, strengthen the information and public relations. Sticking to regular updates
and abroad to appreciate the situation and have the suitable reaction which can be the
most appropriate and timely.
2. Companies’ solutions:
- Companies should review their portfolio and need to focus on the areas of strength,
avoid inefficient widespread investment.
- The shareholders of the company need invest more capital in their own savings, or
pave the way for foreign investors, such as venture capital.
- Companies can take advantage of working capital by reducing inventories,
deferred payment for the supplier as well as require customers to pay sooner.
Companies can also even consider selling off assets.
- Need to find new markets, be more cautious when purchasing or building future
monetary strategy, especially companies with export to the U.S. and Europe, prepare for
the worst scenario that can happen which is the collapse of the European common
currency area (eurozone).
- Enhance and promote the development of the domestic market, especially in the
agricultural procurement of raw material to ensure a close link between the
development of material production areas with industrial and export processing,

distribution system development of critical supplies and retail network, improve service
quality and ensure food hygiene and safety.
- Late payments are becoming more common and occur throughout the supply
chain, from consumer to companies or farmers. The company should have specific
measures to mitigate the impact of this situation.


- Need to buy insurance for goods, factories, business contracts, its machinery and
equipment to minimize the risk to the lowest level.
CONCLUSIONS
Economic crisis of the U.S., Europe and the world will certainly negatively affect
the country's economy on both direct and indirect perspective, however, the level is not
the same as that of other countries and could not be determined specifically; we should
not be too worried and panic, but not too subjective, instead, be calm and look at the
situation and find the solutions. Although there are different opinions, but in general it
can be said that the economy tends to move well, gradually return to the trend of stable,
inflation has been controlled, the growth rate is at appropriate level, the policy
mechanisms are gradually being reviewed to be more appropriate and still act as good
business and investment environment for domestic and foreign enterprises.