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NEWS UPDATES Asean Affairs    26 April  2016  

Gov’t must tighten public spending: economists

Vietnam: Economists last Friday urged the Government to tighten management of public spending to reduce the budget deficit and to ease pressures caused by the public debt.

Further, these measures would help to assure that the goal of 6.7 per cent economic growth is reached for the year.

Director of the Central Institute for Economic Management (CIEM) Nguyễn Đình Cung said, at a Friday workshop on the Việt Nam economy in the first quarter, that it was necessary to review public investment projects to eliminate inefficient ones.

Also, CIEM’s report on Việt Nam’s first quarter economy said that the budget deficit amounted to VNĐ47.1 trillion, or US$2.1 billion, equaling 5.53 per cent of the gross domestic product (GDP), which was higher than the rate of 4.61 per cent in 2015 and 4.91 per cent in 2014, as well as the average rate of 4.86 per cent in the 2011-15 period.

“If the budget deficit is not put under better management, the room for fiscal policies would continue to narrow and pressure for issuance of Government bonds would intensify in the following quarters,” CIEM warned.

CIEM cited statistics indicating that the ratio of the budget deficit to GDP of Việt Nam was higher than other countries in the region. Last year, the ratio was 6.9 per cent to GDP, compared to 1.2 per cent ratio in Thailand, 2.3 per cent in Indonesia and 2 per cent in Campuchia.

Although the country’s budget deficit was forecast to be on a decline in coming years, its ratio to GDP would become higher than ASEAN countries by 2020, according to CIEM.

The problem in public spending was that the expenditure for growth investment was dropping, while recurrent expenditures and others was rising, Cung said.

During the 2007-13 period, expenditure for growth investment averaged 27.7 per cent of total spending, but fell to 16.3 per cent in 2014 and 15.6 per cent in 2015.

“Being a low-middle income country, public investment played a crucial role in promoting economic development. Such low percentages are worrisome,” Cung said.

The figures indicated that efforts of managing public spending still failed to narrow the budget deficit, while pressure for repayment of Government debt was rising from VNĐ185.8 trillion in 2013 to VNĐ296.2 trillion in 2015.

He noted that the management of public spending must be increased to ensure efficiency.

’Quality growth’

After a slowdown in the first quarter of this year, CIEM forecast that GDP growth would reach 6.7 per cent in the second quarter, rising from 5.46 per cent growth in the first quarter.

Cung said that growth rates were not important. “What’s important is quality growth,” he added.

Further, he urged the Government not to increase taxes and fees, so the confidence among businesses would increase, given the current situation that firms were still facing difficulties.

Statistics revealed that 2,919 firms were dissolved in the first quarter, up 13.8 per cent over the same period last year, while more than 20,000 others halted operations, an increase of 23.9 per cent.

Officials noted that policy-makers should pay special attention to the US Federal Reserve’s rate policies in the second quarter.

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AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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