With the US economy poised on the brink of recession, senior economist Le Dang Doanh at down with Viet Nam News reporter Dieu Thuy to talk about potential impacts on the global economy and on Viet Nam.
If the US economy falls into a recession, as many are now predicting, what will be the impact on Viet Nam?
A number of factors signal a US recession, including a reduction in the signing of contracts and slowing economic growth. According to economists’ measures, if indicators fall for two successive quarters, it proves the US is in a recession.
But, the US is in an election year, so authorities there have been wary to admit how bad the situation is. But they’ll have to admit it soon.
As for Viet Nam, I think that a US recession would impact heavily on all sectors, including foreign direct investment, indirect investments and exports.
In my opinion, exports could suffer the worst because the US is the leading market for Viet Nam exports, especially for textiles and garments and seafood products. When the US is in a downturn, their spending on imports will decline, and exporters here will face difficulties.
Will Chinese goods overrun the local market if demand for these products slows on the US market?
Chinese products will surely overflow the local market if the US falls into recession.
Although Vietnamese products will give them stiff competition, Chinese products are diverse and attractive. They will put pressure on local producers to lower prices, cutting into earnings and putting some local jobs at risk.
How will foreign investment, including investment into the Vietnamese stock market, be impacted?
Many countries are pouring investment into Viet Nam, not only the US, and the US is not the leading source of foreign investment into Viet Nam.
Nevertheless, the US economy has a decisive impact on other economies worldwide and it could have an impact on many of those countries which invest most heavily into Viet Nam.
The disbursement of committed capital will also slow due to lessened export earnings, among other things.
The US ecomony invests US$6-9 billion per year into the Viet Nam stock exchange. In a recession, these US investors would be the first to withdraw money from the local stock market, and investors from other countries would then follow suit unless the local market is safe and attractive enough.
The depreciation of the US dollar against the dong has also caused worries for exporters, do you think so?
Yes, I agree. The depreciation of the dollar will have serious impact on local exporters as the costs of producing export goods is high and profit margins low. Some exporters may face bankruptcy.
In the end, it’s workers who suffer the loss directly if they lose their jobs.
Recent measures by the State Bank, such as reducing interest rates, will have some positive fiscal effect. Authorities need to have policy moves ready next time to avoid losses.
As an economist, what would you suggest to authorities and to businesses to minimise damage?
The authorities above all need to be familiar with the situation in detail, allowing them to develop flexible policies to cure the problems. Viet Nam will not be alone in suffering fallout from a US recession.
Producers and exporters need to cut costs, eliminating redundant processes and workers, then they could avoid the waste of money and labour.
They should also direct investment abroad, and not only concentrate on the big markets
Workers must focus efforts on creating high-quality products that are competetive with those of other nations. This way, Viet Nam can preserve its own economic growth rates and avoid undue damage from the US recession. — VNS
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If the US economy falls into a recession, as many are now predicting, what will be the impact on Viet Nam?
A number of factors signal a US recession, including a reduction in the signing of contracts and slowing economic growth. According to economists’ measures, if indicators fall for two successive quarters, it proves the US is in a recession.
But, the US is in an election year, so authorities there have been wary to admit how bad the situation is. But they’ll have to admit it soon.
As for Viet Nam, I think that a US recession would impact heavily on all sectors, including foreign direct investment, indirect investments and exports.
In my opinion, exports could suffer the worst because the US is the leading market for Viet Nam exports, especially for textiles and garments and seafood products. When the US is in a downturn, their spending on imports will decline, and exporters here will face difficulties.
Will Chinese goods overrun the local market if demand for these products slows on the US market?
Chinese products will surely overflow the local market if the US falls into recession.
Although Vietnamese products will give them stiff competition, Chinese products are diverse and attractive. They will put pressure on local producers to lower prices, cutting into earnings and putting some local jobs at risk.
How will foreign investment, including investment into the Vietnamese stock market, be impacted?
Many countries are pouring investment into Viet Nam, not only the US, and the US is not the leading source of foreign investment into Viet Nam.
Nevertheless, the US economy has a decisive impact on other economies worldwide and it could have an impact on many of those countries which invest most heavily into Viet Nam.
The disbursement of committed capital will also slow due to lessened export earnings, among other things.
The US ecomony invests US$6-9 billion per year into the Viet Nam stock exchange. In a recession, these US investors would be the first to withdraw money from the local stock market, and investors from other countries would then follow suit unless the local market is safe and attractive enough.
The depreciation of the US dollar against the dong has also caused worries for exporters, do you think so?
Yes, I agree. The depreciation of the dollar will have serious impact on local exporters as the costs of producing export goods is high and profit margins low. Some exporters may face bankruptcy.
In the end, it’s workers who suffer the loss directly if they lose their jobs.
Recent measures by the State Bank, such as reducing interest rates, will have some positive fiscal effect. Authorities need to have policy moves ready next time to avoid losses.
As an economist, what would you suggest to authorities and to businesses to minimise damage?
The authorities above all need to be familiar with the situation in detail, allowing them to develop flexible policies to cure the problems. Viet Nam will not be alone in suffering fallout from a US recession.
Producers and exporters need to cut costs, eliminating redundant processes and workers, then they could avoid the waste of money and labour.
They should also direct investment abroad, and not only concentrate on the big markets
Workers must focus efforts on creating high-quality products that are competetive with those of other nations. This way, Viet Nam can preserve its own economic growth rates and avoid undue damage from the US recession. — VNS
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