Economists have advised the authorities to tread carefully

Hanoi (VNA)- Economists have advised the authorities to tread carefully when
implementing the Government’s second stimulus package worth 8 billion USD in order
to avoid both inflation and a recession.

The suggestion was made at a workshop in Hanoi on July 23 that drew over 100
industrial executives, domestic and international economists and representatives
from State management agencies, to discuss the effects of the first stimulus package
that offered 1 billion USD in bank loans with subsidised interest rates to
businesses.

They said the first package has so far benefited both banks and enterprises and has
almost met its targets of containing the national economic downturn, promoting
production and ensuring social welfare during the global economic crisis.

By July 16, almost 377.7 trillion VND had been disbursed as bank loans with
subsidised interest rates to businesses.

Nick Freeman, an economic specialist from the Asian Development Bank (ADB),
acknowledged that Vietnam’s macro economy started to show signs of recovery in the
second quarter of 2009.

He went on to say that although economic stimulus packages are necessary during
global economic downturns they should only run for a short period of time and be
discontinued at the right time.

However, if they are phased out too soon, the economy could fall back into
recession, as it was in the fourth quarter of 2008. If they run for too long, the
economy may overheat and inflation could rocket to the levels seen in the fourth
quarter of 2007 or the first quarter of 2008, the ADB expert warned.

He suggested the deadline for the Government’s stimulus package should come when
the country begins to draw up its 2010-20 socio-economic development strategy.

Vietnam should only take essential measures such as credit programmes for small- and
medium-sized enterprises and focus on improving the economy’s competitiveness
while introducing long-term reforms, he said.-Enditem