Wednesday, June 10, 2009

Nhan xet bao cao cua WB

Điều chưa có trong báo cáo

Tuần này TBKTSG đăng bài của Jonathan Pincus nhận xét về báo cáo điểm lại tình hình kinh tế Việt Nam của Ngân hàng Thế giới vừa mới công bố. Tôi nghĩ đây là bài khá quan trọng vì nó lý giải được một số hiện tượng bất thường hiện nay của nền kinh tế như chứng khoán cứ lên giá, kéo theo giá đất đai và các loại tài sản khác. Xin mời các bạn đọc bản tiếng Việt trên TBKTSG, còn đây là bản tiếng Anh.

By Jonathan Pincus

The World Bank has delivered an upbeat assessment of the Vietnamese economy in a report presented to this week’s Consultative Group meeting of government and international aid agencies.

The report congratulates the government for its management of the macro-economy in 2008 and 2009. According to the report, resolute action by the government after March 2008 stabilized prices and reduced the size of the trade deficit. At the end of 2008, the government was once again called into action, but this time to reflate the economy in the face of a sharp and sudden global downturn. The report singles out the government’s interest rate subsidy scheme as playing a particularly effective role in supporting domestic demand and protecting the banks from a rise in non-performing loans. “In retrospect,” the report concludes, “it appears that the government of Vietnam chose an effective mix through its first round of stimulus measures.”

The bank goes to say that the government’s interest rate subsidy scheme is no longer necessary now that banks are lending more and economic growth is probably accelerating. Extending the program would mark the return of “policy lending,” which leads to investment inefficiency. The report also argues that other stimulus measures should be scaled back or reconsidered to contain the growth of the fiscal deficit, which the World Bank estimates for this year at about 12% of GDP or possibly larger depending on the size of the stimulus.

However, what is most interesting about this report is what the World Bank has left out rather than what has been included.

The bank is correct to focus on the fiscal deficit and the problem of obtaining adequate financing in the short period. However, the report is mostly silent on monetary policy issues, particularly management of the exchange rate.

Monetary policy is usually thought to be ineffective under fixed exchange rate regimes. The reasons for this are not difficult to understand. If the exchange rate is flexible, lower interest rates lead to a shift of capital out of domestic assets and a depreciation of the currency, which stimulates exports and reduces imports. But under a fixed exchange rate, a fall in domestic interest rates does not affect the nominal value of the currency. Exporters are not helped and imports are not discouraged. But savers, facing lower interest rates in the national currency, shift their money into dollars or buy assets like gold and land. The central bank has to buy up the domestic currency to defend the fixed exchange rate, which in turn reduces the money supply. If the central bank does not intervene, the result is inflation.

From this perspective it is easy to see why monetary expansion has produced a stock market bubble and pressure on dong exchange rates. Domestic producers are also finding it increasingly difficult to compete with the flood of cheap imports. If credit growth continues to accelerate, inflation will pick up speed. Savers will move away from dong assets, putting further pressure on the exchange rate.

This is not to say that nominal interest rates did not need to come down at the end of last year and early this year. The issue is how much they needed to come down, and how fast credit to the economy should be allowed to grow. The important indicator to watch is the real interest rate, or the market interest rate less inflation. Because the inflation rate has fallen this year there was plenty of scope for banks to reduce nominal interest rates and still maintain positive real interest rates. They did not need a subsidy to achieve this.

A fall in the nominal interest rate makes it possible for borrowers to refinance their old loans with new, cheaper ones. The World Bank argues that businesses in Vietnam were able to refinance their loan this year because of the government’s subsidized interest rate policy. However, much of this refinancing would have happened anyway—without adding to the government budget deficit—as nominal interest rates were reduced by the banks.

Some economists conclude that Vietnam could solve these problems through more exchange rate flexibility, or moving to a completely floating exchange rate. Unfortunately, this is not possible in the short or perhaps even medium term. Managing a flexible exchange rate regime requires mature credit markets and well-developed financial institutions, including a reasonably autonomous central bank that has at its disposal a wide range of policy instruments. In this absence of these conditions, a floating exchange rate would fluctuate too much. Trade and investment would suffer.

A better solution would be to allow the dong to fall gradually against the currencies of the country’s main trading partners, and then fix it at a level that stimulates exports and discourages imports of cheap consumer goods without causing too much inflation. By the end of 2008, the real exchange rate—in other words the exchange rate after adjusting for the difference between domestic and foreign inflation rates—was about 33 percent higher than the level recorded in January 2004. Vietnamese exporters are penalized and imports had become considerably cheaper. A step by step approach is best, but the monetary authorities must stand ready to intervene if speculators place heavy bets against the fixed rate.

SBV did engineer a modest depreciation of the nominal exchange rate over the past year. As shown in the figure, the VND-USD rate fell by about seven percent from October 2008 to May 2009. But inflation was still higher in Vietnam than in the US, which means that the real exchange rate did not change much. Meanwhile, Korean won has lost 18 percent of its value against the US dollar over the past year, and the Indonesian rupiah is down about 11 percent.

Another issue that deserves more attention is the rate and quality of domestic investment. Viewed from the demand side of the economy, Vietnam’s rapid growth over the past several years was increasingly “investment led” rather than “export led”. Although export values grew quickly after 2005, imports rose even faster. So trade was a net drain on domestic demand. Over the same period, the gap between domestic savings and investment increased quickly. Domestic savings remained stable but investment grew by more than 15 percent per year on average. Growth was most “investment led” in 2007, leading to the property and stock market bubbles and the inflation of 2008. Too much investment was chasing too few good investment opportunities.

Investment led growth is not necessarily a bad thing. If investment decisions are good, and financing is sustainable, high rates of investment today mean more income tomorrow. But if investment is inefficient or financed by too much borrowing, investment led growth can lead to asset and price inflation and financial instability.

This year the trade gap is narrowing, meaning that there will be less demand “leakage” from trade. At the same time, the rise in government consumption is also injecting a large amount of additional demand into the system. If investment and savings are not brought back into balance, the Vietnamese economy will overheat even at low growth rates.

Some of this rebalancing will occur naturally as a result of the decline in foreign direct investment. The government must do its best to ensure that credit growth does not run too far ahead of economic growth, and that public investment is targeted to efficient projects that have sound financing.

To be fair, the World Bank does recommend that the government “strengthen public investment processes, addressing the weaknesses exposed during the overheating phase.” This is a rather timid statement tucked into a box on the last page of the report. Vietnam’s aid donors would perform a valuable service to the country if they paid more attention to the quality and efficiency of public investment for infrastructure and in the state-owned enterprises. Until these decisions are more transparent and accountable, Vietnam will continue to experience successive round of boom and bust in the macroeconomy.