IMPACT OF FINANCIAL CRISIS ON VIETNAM S ECONOMY 1

IMPACT OF FINANCIAL CRISIS ON VIETNAM’S ECONOMY 1

MACROECONOMIC INDICATORS (1) Ø The more integrated into the world economy, the more Vietnam’s economy affected by the up and down in the world economy. Ø GDP declines: 2007: 8, 4%; 2008 6, 5%; 2009: 4, 5% - 48% Ø High inflation (2006: 6%; 2007: 12%, 2008: 23%) 2

MACROECONOMIC INDICATORS (2) Ø VN Index was slashed by more 50%. Ø Increasing trade deficit. Ø Unemployment is high (more than 300. 000 at the end 2009) 3

FINANCIAL CRISIS AND STABILITY Ø What are threats to peace and stability? Vietnam Government emphasizes on non - traditional security problems: ü Food, energy, financial security ü Poverty ü Inequality 4

GOVERNMENT MEASURES (1) Ø Vietnam Government approved a stimulus program of $ 6 billion. Ø Stimulus measures are aimed at subsidizing/compensating interest rates for enterprises. Ø Develop infrastructure. 5

GOVERNMENT MEASURES (2) Ø Helping low income families Ø Providing Financial assistance for unemployment Ø Encouraging companies to look for new export markets 6

GOVERNMENT MEASURES (3) Ø Encouraging companies to buy equipment, machines, technology for post crisis business. Ø Looking for Foreign Direct Investment. Ø Stimulus program gives a positive result. GDP in the first quarter increased by 3, 1%; exports rose by 2, 4%, trade deficit declined. 7

WHAT SHOULD WE DO TO COPE WITH FINANCIAL CRISIS AT REGIONAL LEVEL? Standing aside and hoping the problem goes away is not a good idea. 8

RECOMMEDATIONS (1) 1/ Increasing the active role of regional governments as a market stimulator and supervisor. 2/ Enhancing intra - trade in Asia, reducing the impact of the slowdown in US/EU demand on Asian exports. 9

RECOMMEDATIONS (1) 3/ Reducing the dependence of Asian Economies on US dollar (in the context of dollar volatility): Multilateralization, Asian Currency Cooperation. 10

RECOMMEDATIONS (1) 4/ Improving regional financial surveillance mechanisms (an early surveillance, legal framework, risk management skills and policy coordination) as well as risk pricing capacity 5/ Finding new channels to help enterprises to cope with the current drying-up of liquidity. 11