Thursday, 23 April 2009

Vietnam to Tap Emergency Reserves to Help Pay for Stimulus


HO CHI MINH CITY, Vietnam -- Vietnam will tap national emergency reserves and step up collection of unpaid corporate taxes to help pay for the country's $8 billion in stimulus packages, a senior Finance Ministry official said Thursday.

Do Hoang Anh Tuan, Vietnam's vice minister of finance, said the country also has a small budget deficit, enabling Vietnam to increase spending without jeopardizing the country's macroeconomic stability.

The country's stimulus package "is a lot of spending, indeed," he said, especially at a time when government revenues are declining due to the weakened economy. But the public can be "confident" that Vietnam will maintain macroeconomic stability, he said.

Some analysts have questioned whether Vietnam can afford its stimulus packages, which were introduced earlier this year and include tax cuts and assistance to banks designed to help the country offset a huge drop in demand for many of its key exports, which include garments, furniture and seafood.

To date, the country's economy has held up better than some other neighboring Asian economies that likewise rely heavily on exports, including Thailand and Singapore, both of which are currently suffering outright contractions of gross domestic product.

But growth in Vietnam has slowed significantly in recent months. The country's economy grew 3.1% in the first quarter of 2009 compared to the previous year, after expanding more than 6% in 2008 and more than 8% in 2007. The government projects that growth will rebound later this year but some private economists have said they believe such forecasts are too optimistic.

Mr. Tuan was speaking at the Asia Society's Asian Corporate Conference in Ho Chi Minh City, which is organized together with The Wall Street Journal Asia.

Mr. Tuan said the government was pursuing other strategies beyond the stimulus packages to help maintain growth. The government is also working to boost transparency in its economy and offer more support for the poor, he said. He said that even though the government is offering tax exemptions to further boost growth, the government can offset some of the lost revenue by clearing out "backlogs" of unpaid corporate taxes.

The Wall Street Journal

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