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Falling oil prices may hit GDP growth, says minister

Tu Hoang
Thursday,  Dec 18,2014,19:34 (GMT+7)
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Falling oil prices may hit GDP growth, says minister

Tu Hoang

By Tu Hoang - The Saigon Times Daily

HANOI – Minister of Planning and Investment Bui Quang Vinh has expressed concerns that Vietnam’s economic growth may slow in the coming years if the country cuts crude oil extractions in the face of plunging global prices.

“If we have to reduce oil pumping, it will leave a huge impact on our economic growth. With a 30% reduction, gross domestic product (GDP) growth is likely to slow 0.8-1.2 percentage point next year,” Vinh told reporters on December 17.

This calculation was based on three main factors of Vietnam’s growth, which are exploitation of natural resources for export, capital growth and labor.

Vinh said if oil drops by US$1 per barrel, the State budget would lose VND1-1.2 trillion.

In the 2015 economic report presented to the National Assembly, the Government projected GDP to grow 6.2% if the oil price stays at US$100 per barrel. Vietnam’s crude oil is now priced at US$60 or even US$55 per barrel.

According to Vinh, the oil price drop has resulted in a sharp decline in budget revenue and growth, and caused many other issues.

Therefore, the Government has set up a taskforce consisting of representatives of the Ministry of Planning and Investment, the Ministry of Finance, the Ministry of Industry and Trade and the central bank to figure out different economic scenarios to cope.

However, the declining oil price will help lower input cost at enterprises and benefit Vietnam which still has to depend on fuel imports, according to Vinh.

“Inflation will be around 2% this year, which is rather low,” he said.

“Nevertheless, they are all forecasts as the oil price can change everyday,” Vinh continued. But he did not mention the possibility of crude oil extraction cuts next year.

Relevant agencies are closely monitoring oil price changes to make appropriate policy recommendations, Vinh said.

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