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IMPACT OF FINANCIAL CRISIS ON VIETNAM’S ECONOMY 1 MACROECONOMIC INDICATORS (1) The more integrated into the world economy, the more Vietnam’s economy affected by the up and down in the world economy. GDP declines: 2007: 8,4%; 2008 6,5%; 2009: 4,5% - 48% High inflation (2006: 6%; 2008: 23%) 2007: 12%, 2 MACROECONOMIC INDICATORS (2) VN Index was slashed by more 50%. Increasing trade deficit. Unemployment is high (more than 300.000 at the end 2009) 3 FINANCIAL CRISIS AND STABILITY What are the threats to peace and stability? Vietnam Government emphasizes on non- traditional security problems: Food, energy, financial security Poverty Inequality 4 GOVERNMENT MEASURES (1) Vietnam Government approved a stimulus program of $ 6 billion. Stimulus measures are aimed at subsidizing/compensating interest rates for enterprises. Develop infrastructure . 5 GOVERNMENT MEASURES (2) Helping low income families Providing Financial assistance for unemployment Encouraging companies to look for new export markets 6 GOVERNMENT MEASURES (3) Encouraging companies to buy equipment, machines, technology for post crisis business. Looking for Foreign Direct Investment. Stimulus program gives a positive result. GDP in the first quarter increased by 3,1%; exports rose by 2,4%, trade deficit declined. 7 WHAT SHOULD WE DO TO COPE WITH FINANCIAL CRISIS AT REGIONAL LEVEL? Standing aside and hoping the problem goes away is not a good idea. 8 RECOMMEDATIONS (1) 1/ Increasing the active role of regional governments as a market stimulator and supervisor. 2/ Enhancing intra - trade in Asia, reducing the impact of the slowdown in US/EU demand on Asian exports. 9 RECOMMEDATIONS (1) 3/ Reducing the dependence of Asian Economies on US dollar (in the context of dollar volatility): Multilateralization, Asian Currency Cooperation. 10 RECOMMEDATIONS (1) 4/ Improving regional financial surveillance mechanisms (an early surveillance, legal framework, risk management skills and policy coordination) as well as risk pricing capacity 5/ Finding new channels to help enterprises to cope with the current drying-up of liquidity. 11