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Business Economics project 2 - Business Economics GM 545...

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Business Economics GM 545 December 2009 Term Project 2 Name: Anh Nguyen
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Exercise 1: Vietnamese macroeconomy in 2010 and three strategic decisions for Asia Commercial Bank in Vietnam. Q1-09 Q2-09 Q3-09 Q4-09 2009 2010 Real GDP growth 3.1 4.2 4.5 5 4.2 5 Inflation 14.4 7 2.5 2 6.5 7 Trade balance US$bn -1.9 -11.2 -11.9 Current account balance (% of GDP) -7 -5 USD-VND (period-end) 17,484 18,000 18,500 18,500 18,500 17,800 In 2008, Vietnam faced a record 17 billion dollars of trade deficits. For the first quarter of 2009, a trade balance has been swung out of the deficits to surplus of USD1.6bn, compared with a deficit of USD 8.4bn in the same period in 2008. This improvement in Vietnam’s trade balance was largely a reflection of weaker domestic demand, which was cutting into imports. In addition, there was a rapid decrease of price of steel and petroleum products (two main import goods of Vietnam). However, because of global financial economics crisis the demand for export goods of Vietnam from traditional market such as Australia, United Kingdom, United States of America, Belgium, Germany and Philippines has seriously fallen. This has made the trade balance has been turning negative for period of time from March to the end of this year. And the predicted trade deficits for 2009 will be USD11.2bn. The nation has a trade deficit not only with the ASEAN group, but also with China and South Korea. It buys three times as much from India as it sells. One of main hopelessness for efforts of decreasing import of Vietnam is that the first oil refinery factory fails to be put into operation. The differences in prices between crude oil of exports and refined oil of import certainly make trade deficit of the nation bigger. Vietnam imports more from these countries than it exports because of its low competitiveness. The low competitiveness can be explained that Vietnam has old and low technology and machinery, so domestic goods cannot compete with imported goods in quality and price. In addition, Vietnamese businesses cannot obtain enough materials from domestic sources they tend to import more and more materials from China, so that businesses cannot take full advantage of mutual tariff cuts to boost exports. Moreover, because of the painful recession during last two years, export markets of Vietnam are still being wary about the prospects for a strong, sustained economic recovery and people are still decrease their habit of consumption so there is no signal of a rapid increase for export goods of Vietnam. Consequently, the perspective for balance trade of Vietnam will be higher for next year. According to HSBC prediction the amount of trade deficit by is USD11.9bn in 2010 In 2009, Vietnamese government has applied a demand stimulus program by providing loans with subsidized interest rates to small- and medium-size enterprises and loosened monetary policy by decreasing interest rates to protect the economy from effects of global financial crisis.
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