1. Resolution 11: drastic fiscal austerity measures
On February 24, the Government issued Resolution 11, focusing on curbing inflation, stablising macro-economic situation, tightening control over public investment and ensuring social security. As a result of the resolution, the country has seen positive economic signals this year such as lower interest rates and improved efficiency in public investment. The Government has set a target to cap inflation at 9% next year.
2. Inflation estimated at over 18%
Despite stabilisation measures, Vietnam’s inflation rate in 2011 is estimated to reach 18.58%, much higher than the levels forecast by Government ministries and agencies. Foodstuff, education and food groups have seen the highest rise: 29.34%, 23.18% and 22.82%, respectively.
3. Frozen real estate market
The Vietnamese property market witnessed massive drop in prices in many areas, especially luxury apartments, due to the Government’s monetary tightening policies. According one the expert, next year the market is likely to see further devaluation in the real estate sector. It's not all gloomy though; the upside to this is that homes will become more affordable for those with real demand.
4. Gold prices set record highs
2011 might be considered the year of gold, with gold price setting new records. In August, gold prices reached VND49 million (USD2,333) per tael. The year also saw a lot of gold speculation. Saigon Jewelry Holding Company (SJC) gold prices were nearly VND5 million (USD238) per tael higher than the international market price.
In order to stablilise the gold market, the State Bank of Vietnam now only allows businesses that have a registered capital of over VND500 billion (USD23.8 million) to produce gold bars. Under this rule, SJC is the only company permitted to produce gold bars.
5. Restructuring of banking system
After a period of fast growth in the banking sector, with 130 credit organisations and nearly 10,000 new branches and transaction offices appearing nationwide, the banking sector has begun to show it weaknesses during through their race to increase interest rates, the increasing amount of bad debt and the violations of banking officials.
The State Bank of Vietnam took drastic actions towards reform of the financial sector, starting by dealing with banks that raised deposit interest rates higher than the stipulated cap of 14%. SBV is also trying to speed up mergers and acquisitions in the banking world in order to increase the liquidity of weak banks. Recently, the First Joint Stock Commercial Bank (Ficombank), Saigon Commercial Bank (SCB) and Viet Nam Tin Nghia Commercial Joint Stock Bank (TinNghiaBank) merged into one bank.
6. Stock market faces gloomy days
The Vietnamese stock market has witnessed gloomy transactions this year. Value of many shares were even cheaper than a cup of tea or a bundle of vegetable. A share coded VKP of Tan Hoa Plastic Joint Stock Company was ever valued at less than VND1,000 (USD0.04). Up to 65 securities companies made losses in 2011 and 71 others saw accumulated losses.
7. Black market bankruptcies
Hundreds of black market credit bankruptcy cases have taken place in localities nationwide this year. Most of the lenders poured their money into the areas of real estate, banking and securities. The situation is forecast to continue, meanwhile the real estate market remains frozen and the Government continues its monetary tightening policies.
8. 50,000 businesses go bankrupt
2011 was a challenging year for Vietnamese businesses. The business capacity of many companies sharply decreased due to high interest rates. Around 50,000 enterprises went bankrupt during the year. Economist, Tran Dinh Thien, forecast that next year would pose even more challenges for Vietnamese firms in terms of strategy if they are to avoid a worsening situation.
9. Bad year for private airlines
This year, two local private airlines; Indochina Airlines and Trai Thien Air Cargo had their licenses revoked.
Jetstar Pacific Airlines, a budget carrier, may be merged with Vietnam Airlines in the near future, which has stirred a concern about weaker competitiveness in the aviation market.
10. S&P lowers Vietnam’s long-term currency credit rating
The global credit rating firm Standard & Poor’s (S&P) lowered the credit rating for Vietnam to 'BB-'. It previously had been at 'BB'. S&P also downgraded the credit rating of the Vietnamese banks, Vietcombank, Techcombank, and BIDV. ln addition, Hoang Anh Gia Lai Joint Stock Company’s had their credit ratings downgraded from B to B-.
