The Verge Of A Global Recession

Published Date: 02 Nov 2017

Student’s name

: LE THANH NHAN

Signature: …………………

ID

: VN1001119

Class : IeMBA S01

Date of completion

: 04/01/2013

TOPIC

CONTENT

Research Report

Some countries using the Euro currency – "Eurozone" countries – are experiencing significant economic destabilisation while others who are more stable fear financial and political "contagion". For well over a year, uncertainty surrounding the sustainability of the Eurozone has affected business confidence. The following are some commentaries on the situation.

Please read the following extracts in the context of the task outlined below.

Seekingalpha.com January 4, 2012

2012: On The Verge Of A Global Recession?

It seems that almost the entire world is stuck in three camps with different outlooks as to what the future brings: one group thinks the worst is over and that the economy will continue to recover, the second group thinks we had a temporary recovery but that we are now entering a double-dip recession, and the third group (perhaps those who are too uncertain or afraid to make a directional call) thinks the economy will muddle through directionless and flat for some time. All of these scenarios are still possible, but I favor scenario #2 – that we are on the verge of a disastrous recession led by slowing global growth, economic shocks, the onset of deflation, falling commodity prices, downgrades and failed expectations.

Seekingalpha.com

YouTube – 22 September, 2011 Jim Rogers- The next global recession will be worse than 2008 ...Zerohedge.com 25 May, 2012, Marc Faber Sees 100% Probability Of Global

Recession In 2013

From around two minutes into this CNBC clip, Marc Faber brings the conversation

back into sharp focus. Noting that "whenever everybody focuses on just one thing -

Greece and Europe in this case - there are other things that are far more important - such as a meaningful slowdown in India and China - going on that are being ignored". But remaining on the topic of Europe, Faber consistently opines that the next event risk will be the Greek exit - even though Faber suspects strongly that Germany will cave to Eurobonds eventually - as he comments that the longer the delay of a restructuring/default/exit/euro-bonds takes the higher the probability of a gigantic systemic failure.

Zerohedge.com 25 May, 2012, Marc Faber Sees 100% Probability Of Global

Recession In 2013

From around two minutes into this CNBC clip, Marc Faber brings the conversation back into sharp focus. Noting that "whenever everybody focuses on just one thing - Greece and Europe in this case - there are other things that are far more important - such as a meaningful slowdown in India and China - going on that are being ignored". But remaining on the topic of Europe, Faber consistently opines that the next event risk will be the Greek exit - even though Faber suspects strongly that Germany will cave to Eurobonds eventually - as he comments that the longer the delay of a restructuring/default/exit/euro-bonds takes the higher the probability of a gigantic systemic failure. businessinsider.com, Michael Snyder, 17 January 2012, 22 Signs America Is On The

Verge Of A Devastating Global Recession

2012 is shaping up to be a very tough year for the global economy. All over the world there are signs that economic activity is significantly slowing down. Many of these signs are detailed later on in this article. But most people don't understand what is happening because they don't put all of the pieces together.

If you just look at one or two pieces of data, it may not seem that impressive. But when you examine all of the pieces of evidence that we are on the verge of a devastating global recession all at once, it paints a very frightening picture

Panic about the Greek government’s ability to repay its creditors is infecting other

euro-area countries’ sovereign debt. Where will it end?

Apr 29th 2010

After simmering for months, the Greek sovereign-debt crisis has boiled over. The promise of a rescue by the IMF and the country’s euro-zone partners, worth €45 billion ($60 billion) or more, is no longer enough to persuade many private investors to hold Greek public bonds. Opposition to the bail-out in Germany meant that market confidence had all but vanished by April 27th, when Standard and Poor’s (S&P) slashed its rating of Greek government bonds to BB+, just below investment grade. The rating agency also lowered its rating on Portugal, to A-; a day later it downgraded Spain from AA+ to AA.

Greek rescue package will mean a default, warns S&P

Graeme Wearden - 4 July 2011

Efforts to resolve the Greek debt crisis were dealt a blow on Monday when rating agency Standard & Poor's ruled that Europe's favoured rescue plan is in effect a default. S&P warned that it would declare that Greece had defaulted, if the debt rollover plan proposed by France's banking sector is implemented. The decision, which echoes the views of other rating agencies in recent days, casts a cloud over the Eurozone as policymakers struggle to devise a second bailout for Greece.

In Greece …… the government is struggling to reach agreement on a bond swap with banks that is crucial to a second bailout package from European countries and the International Monetary Fund worth $165 billion. Without that assistance, Athens faces the threat of a debt default in March.

Your Task

You are a consultant at McKinsey and Co tasked with developing a comprehensive analysis of the possible effect on Vietnam’s business environment IF we suffer another Global Recession starting any time from 2013 to 2015.

McKinsey plans to produce a comprehensive report for its Vietnamese clients to assist them with their strategy creation based on the effects of Financial turbulence in the US and the Eurozone as might be seen in Southeast Asia (SEA). Your report will need to assess actual and potential financial risks as a result of a future financial crisis and provide advice on their impact. In particular you are required to analyze and assess the:

i. Impact of a future US or Eurozone Recession on local businesses in Vietnam;

ii. Global impact on businesses and industries;

iii. Impact on shareholder value and wealth of the most affected companies;

iv. Short, medium and long term political influences which might affect financial performance of businesses in Vietnam.

vi. You may decide to find MORE articles than just the ones cited above. These are given as a starting point and provide direction.

Objectives of Assessment Task/

•Develop critical and analytical skills relating to the international business environment.

•Develop various research, data gathering and synthesising skills.

• Select and apply relevant literature.

• Demonstrate professional writing skills.

Assessment Guide

•The assignment is to be presented as a business report which includes an executive summary and concludes with a set of recommendations for your company’s clients. Your analysis must support for your recommendations.

Assessment Criteria

•The following criteria and associated allocation of marks will be used:

Clear explanation and analysis of each of the four issues: appropriateness, applicability and depth.

Quality of research: variety and quality of sources of information.

English expression and grammar, appropriate and correct referencing, style and

readability, and overall presentation

Summary economic situation from the post - crisis world.

Until mid-2010, the world economic situation still happening very complex. The recovery trend in the major economies is confirmed (two leading emerging economies, China and India are acting as the driving force for the recovery process of the world economy), but not uneven and uncertain, the speed of recovery of the economy is very different, the good and bad mixed signals constantly and worries about Europe's debt crisis has not ended. America and Europe despite economic prosperity but at a slower rate than previously forecast, while Asia continues to be the driving force and superior rapid recovery. Can tell, the recovery of the world economy has been confirmed, even when others are still skeptical and need more time to address and overcome.

Global Economic Prospects report dated 21.04.2010 of the IMF noted that the debt problem is at too high requires a lot of effort and drastic measures of the Government as well as to manytime than expected. IMF forecasts global unemployment remained high in 2010 and 2011 and the government still has to promote economic growth to reduce unemployment. IMF said that solving the problem of unemployment is the biggest policy challenges as the global economy out of the worst recession since the second world war. Thus, although growth has returned, but the recovery uneven and uncertain, unemployment in many countries is still higher than the permitted level and the social impact of the crisis remains in many places. Therefore, the highest priority now is to strengthen the economic recovery, restore, reform and strengthen financial systems and create global growth strong, sustainable and balanced.

Table 1 : Forecast world economic prospects and a number of countries

 

Forecast

Forecast

 

Date

Date

Khu vá»±c

26/01/2010

21/4/2010

 

2010

2011

2010

2011

Kinh tế TG

3.9

4.3

4.2

4.3

Các nước pt

2.1

2.4

2.3

2.4

Mỹ

2.7

2.4

3.1

2.6

Châu Âu

1

1.6

1

1.5

Nhật Bản

1.7

2.2

1.9

2

Trung Quốc

10

9.7

10

9.9

Ấn Độ

7.7

7.8

8.8

8.4

Mới nổi và đang PT

6

6.3

6.3

6.5

Source: IMF, global economic prospects report dated 26/1/2010 and 21/4/2010

In the United States, the U.S. economy is showing signs of recovery and the recovery appears solid, despite the debt crisis in Europe and the U.S. first quarter GDP was revised down to 2-fold from 3.2% to 3% official and recently revised down to 2.7%. In the first six months of 2010 consecutive employment growth rate, industrial production activities expanded, the number of homes sold, number of durable goods continued to rise; consumer price index and

 Increase economic growth, trade deficit speed and reduce the budget deficit over the last month has shown positive signs of recovery of the economy.

Although the U.S. economy is forecasted to grow significantly in 2010, but the United States still faces a series of challenges. The economic stimulus package has not created many jobs as expected and can not make unemployment calm about. The worrying thing is that the unemployment rate increase that personal consumption, accounting for 70% of GDP, decrease, hinder U.S. economic recovery. The economic experts have pointed out four risk to the U.S. economy is (i) U.S. public debt level is too high (ii) the state budget deficit is too high, (iii) energy, especially oil mine needs U.S. economic growth deficiency and (iv) the current Greek debt crisis will affect U.S. exports and the international financial system, which will affect the economy U.S. economy.

U.S. financial markets are not yet out of the crisis when the number of U.S. banks bankruptcy continues to rise. In the first seven months of 2010, in the United States has added 102 banks failed, although this is mostly small banks and local banks. American Deposit Insurance Corporation (FDIC) to predict the number of U.S. bank collapse will reach the highest level in you III/20102 and the banks collapse would cost about $ 60 billion in the period 2010 - 2014.

Before this situation, on 21/07/2010, U.S. President Barack Obama signed the bill "Protecting consumers and the Dodd-Frank Wall Street reform" in order to protect consumers and ensure economic stability better. This is the law of the most powerful and far-reaching reform since the Great Depression of the 1930s to the present and is considered a historic turning point, the evaluation of all existing regulations in the financial system U.S.. Accordingly, the Dodd-Frank Act will prevent the company has the ability to threaten the economy, the establishment of a new agency to protect consumers and supervision over financial markets.

In the United States, the U.S. economy is showing signs of recovery and the recovery appears solid, despite the debt crisis in Europe and the U.S. first quarter GDP was revised down to 2-fold from 3.2% to 3% official and recently revised down to 2.7%. In the first six months of 2010 consecutive employment growth rate, industrial production activities expanded, the number of homes sold, number of durable goods continued to rise; consumption and economic growth increase speed trade deficit and budget deficit down from the previous month showed positive signs of recovery of the economy.

Although the U.S. economy is forecasted to grow significantly in 2010, but the United States still faces a series of challenges. The economic stimulus package has not created many jobs as expected and can not make unemployment calm about. The worrying thing is that the unemployment rate increase that personal consumption, accounting for 70% of GDP, decrease, hinder U.S. economic recovery. The economic experts have pointed out four risk to the U.S. economy is (i) U.S. public debt level is too high (ii) the state budget deficit is too high, (iii) energy, especially oil mine needs U.S. economic growth deficiency and (iv) the current Greek debt crisis will affect U.S. exports and the international financial system, which will affect the economy U.S. economy.

U.S. financial markets are not yet out of the crisis when the number of U.S. banks bankruptcy continues to rise. In the first seven months of 2010, in the United States has added 102 banks failed, although this is mostly small banks and local banks. American Deposit Insurance Corporation (FDIC) to predict the number of U.S. bank collapse will reach the highest level in you III/20102 and the banks collapse would cost about $ 60 billion in the period 2010 - 2014.

Before this situation, on 21/07/2010, U.S. President Barack Obama signed the bill "Protecting consumers and the Dodd-Frank Wall Street reform" in order to protect consumers and ensure economic stability better. This is the law of the most powerful and far-reaching reform since the Great Depression of the 1930s to the present and is considered a historic turning point, the evaluation of all existing regulations in the financial system U.S.. Accordingly, the Dodd-Frank Act will prevent the company has the ability to threaten the economy, the establishment of a new agency to protect consumers and supervision over financial markets.

In Europe, this region quarter economic growth of 0.2% compared to the fourth quarter of 2009, is higher than expected but lower than the remaining countries and regions. Although the EU and governments are still trying to put the eurozone economy out of the crisis but the budget deficit problem, debt and unemployment are obstacles to the recovery of the European region Europe in particular and the world economy in general. Issue debt crisis in Europe is widespread despite eurozone leaders approved a 750 billion euro bailout package (equivalent to approximately 1.000 billion USD) in order to avoid the risk of the debt crisis disrupt regional economy (Details will be discussed in Part II).

In Europe today, the driving force for growth, especially domestic demand has leveled off makes these countries is forecast economic growth will not be strong in the coming months and until the end of 2011. EU warned that things could be even worse if the crisis deepening and labor market continued bleak, the unemployment rate in the eurozone continues to increase.

In Asia, according to the IMF, WB and ADB, the Asian economy has experienced spectacular growth. All three organizations are further confirmed the recovery of Asia plays an important role in promoting the global economy. The data on GDP growth in the first quarter of the Asian countries reinforces for the above. Asian countries are forecast to grow significantly with an increase of about 8.7%, in which the economic ship, such as China, India, Korea, Japan, ASEAN is the impressive recovery, especially in the export sector due to the recovery of the world economy.

However, Asian countries also face the challenge of inflation and asset bubbles. The strong recovery of Asian economies has attracted large capital inflows into the region, while capital absorption of many economies in the region is very limited can lead to cash flow to be poured into the stock market or real estate, causing the bubble and start a new phase of the global financial crisis.

Thus, we can see the economic policy of the Government has positive effects bring the world out of the crisis, many countries in the world economy continues to stabilize. However, the recovery is uneven place and uncertainty, debt problems, unemployment in many countries is still higher than the permitted level and the social impact of the crisis still exists in many places.

Issue public debt and budget deficit in Europe

European Commission (EC) for that period of the worst economic downturn in this area have come across and the regional economy will gradually recover in 2010, the unemployment rate and the budget deficit will declining and the business will do business effectively. However, compared with other Asian economies, America has had spectacular recovery, the recovery of Europe remains modest. Widespread debt crisis in the EU caused concerns about the collapse of the European financial system and more serious default by a number of national and common European currency system is increasingly more pronounced.

The risk of recession in Europe have been many signs before, when Greece signs insolvent, the budget deficit stood at a high level leads to the budget of the PIIGS countries (Portugal, Ireland, Italy, Greece, Spain) increasingly narrow. These statistics show that public debt and budget deficits in almost all the countries in the region has exceeded the prescribed rate is 60 per cent and 3 per cent of GDP (see chart details). More seriously, this ratio is expected to continue to increase in 2010 and 20 114. One of the causes of this situation that the country had to spend too much money to reduce the negative impacts of the crisis. However, the deeper reason is the hasty and loose in the implementation of the provisions of the State to be eligible to join the alliance.

Similar to Greece, many countries in the EU also expressed uncertainty and a list of these countries has not stopped. However, only when the situation in Greece is really serious, the EU started to discuss solutions. In fact, due to disagreements between the national and internal disagreements in individual countries (Germany, France), the Greek bailout process very slow, parties shall always pushing each other and not uniform how and relief measures. The delay is mainly due to the controversy over the amount of the contribution to the Greek bailout, as well as disagreement about the conditions attached to Greece. Even the European Central Bank (ECB) can not make head settle disagreements between nations or direct the implementation of a feasible measures.

Only when the crisis risk widespread, making monetary union eurozone likely to break, the water really serious when discussing the Greek bailout measures. After about one month the new leader vowed to do whatever necessary to ensure the economic stability of the region and approved a 750 billion euro bailout package to avoid the risk of sovereign debt crisis fueled rupture of the regional economy.

Thus, the amount of money spent by the EU in order to avoid the risk of the debt crisis, disrupt the economy, this area is a huge number compared to the initial estimate. Most analysts have generally said that the huge bailout is only meant to help the poor countries in the eurozone have more time, but can not solve the fundamental debt problem in Europe this continent. The chaos on the market today can only be saved if the 16 eurozone member states to reform their economic system and reduce the budget deficit. Moreover, not only the Greeks need to be saved, but more and more people believe that the EU, IMF and ECB have launched larger aid to help other countries such as Portugal, Spain, Italy. If the situation is worse than both Portugal, Spain and Italy also have to rescue the EU budget is insufficient data saved? Because Greece's current debt is only $ 236 billion, is a very small number compared with $ 1.100 billion of Spanish or Italian 1400 billion

Looking back in 2008, when the economic crisis originated from the U.S. subprime mortgage lending spread, the U.S. government has continued to pump money to rescue the economy, starting with the $ 700 billion bailout package of The program removes the bad assets (TARP). But this bailout and the next series of packages to rescue the financial system does not achieve the desired objectives. The bailout even as the market fluctuates constantly in the negative direction and is seen as a precondition for the current crisis in Europe by this sector debt to pump money into the economy. So the huge bailout of Europe through not only bring confidence to the market but also the severity of the debt crisis in Europe and increasing concerns about the economic situation regional economic deterioration as well as the effectiveness of the bailout will prevent the global economic recovery.

According to economic experts, the crisis in Europe has exposed the weaknesses of financial institutions in the region, there is no unified structure of the financial budget, do not have the financialwater. When the European regional monetary union is established, it only wants to build a monetary union without creating a political coalition, that is just agreed to establish the European Central Bank, but did not want to with shared authority to collect taxes, this is considered to be the key lead to debt problems and severe budget deficit in the eurozone today. Therefore, although governments have expressed their determination help Greek and however, the water is very difficult to make the financial commitment to help specific. Some analysts also warned unless the EU can gradually expand the foundation of political cooperation in the region, if not the entire league the common use of the euro may collapse completely.

Thus, Europe is facing major challenges and only if the root cause is solved, new problems arise. Analysts have warned that even if the EU can solve this debt crisis of Greece, but in the future will certainly face a bigger test if you have not established alliances both economic and political.

Assessment and review of adaptation options and forecast the next level of spillover effects in the future

The global financial crisis originated from the U.S. has spread around the world with the affected force governments to spend a lot of money to minimize the negative impact. Can confirm the worst phase of the crisis is over, but the effects of it still exists in many places. America is where the source of the crisis, but so far the U.S. economy is showing signs of recovery and the recovery appears solid, despite the debt crisis in Europe. Moreover, U.S. lawmakers have historic laws for far-reaching reforms and the U.S. financial system. Meanwhile, in Europe with the disadvantages of the financial mechanism as analyzed above will still face challenges and difficult to solve the root if there is no consensus, cooperation and make legislation to address thoroughly the similar difficulties in the U.S.

Overall assessment of the impact of the world economy to the economy of Vietnam

The impact of the world economy and restructuring requirements of Vietnam's economy.

Vietnam in the context of global economic integration inevitably impact from global economic developments. The impact from the financial crisis and global economic downturn ago (from 9/2008) for Vietnam is considered less than other countries in the region, the economy only slowed but not fall into a recession. Recognizes the impact of the crisis, from the fourth quarter of 2008, the government has moved from priority target inflation priority to prevent the decline in growth, value macro-economic stability and ensure social security. Despite achieving significant results in 2009 as curbing inflation at 6.52%, 5.32% GDP growth in the context of the world economy experienced negative growth, macro-economic stability, but most of the areas related to the world have been hit, in which the value of exports fell by 9.7% in 2009, 15.4% tourism, attract investment foreign investment fell by over 70%. In the process of innovation and economic development, the Vietnamese economy increasingly integrated into the world economy, in particular Vietnam joined AFTA and WTO. The integration of the world economy will affect the Vietnamese economy through two main market is the market of goods, services and financial markets

Chart 1 : GDP growth in Vietnam and the world

Source : VietCapital

End of second quarter 2009, positive signals about the world economic situation and the large water appeared more and more, the world economy gradually recovers. In Vietnam, economic growth recovered sharply with increasing GDP growth in each quarter: the first quarter (3.1%), second quarter (4.5%), third quarter (5.8%) and the fourth quarter (6.9%).

Following the success achieved in 2009, in 2010, the government and policy solutions in time and set the stage for economic growth, macroeconomic stability in 2010. Highlight the message of 2010 of the Prime Minister has clearly defined focus solution for task 5, 2010, guideline for the Ministries to plan implementation. In the 2nd task group "focused investment promotion, business development and restructuring of the economy", which is the key to the door of sustainable growth and stability in the long run.

In the context of our country's economy is increasingly integrated and in terms of the world economy has not really recovered from the crisis, the restructuring of the economy of our country to address the following major issues: (1 ) to create a solid foundation for economic restructuring by creating the institutional reform mutation, further improvement of the institutional market-oriented economic socialist in accordance with schedule commitments WTO; (2) infrastructure development, investment promotion a whole way of depth and widespread;, and (3) development of human resources to meet the requirements of the economy.

2 .An overview of the economic results achieved in recent times

• The positive definition: The economy recovered fairly fast growth and prosperity.

GDP growth reached a high level and on the third industry, services and agriculture, forestry and fisheries.

The amount disbursed FDI remains modest pace, reaching about 50% of the plan; ODA disbursements reached 57% of the plan.

Tightly controlled inflation, high credit growth pressure surge nearly 38 percent in 2009.

Stress liquidity of the banking system is solved by the central bank has actively pumping large volumes capital through OMO, refinancing.

The foreign exchange market liquidity, very abundant supply.

• The drawbacks:

No breakthrough in FDI attraction, the amount of registered capital is very limited.

The trade deficit continued to deteriorate due to the growth of exports, although improved, is still much lower than the growth rate of imports.

Credit growth is low, only 41% of the plan year.

The interest rates and relatively high interest rates persist as interest rate reduction schedule "10, 12" started to be deployed.

Analysis and impact assessment of sectors in the economy.

Industry and Retail

If the impact of the global financial crisis revealed very clearly in the trade balance, export and import of Vietnam, for industrial activities, agriculture and the impact of servicesDepression can also be observed on the extensive, though not as clear as for import and export operations.

Industrial activities

In the early months of 2012, when the economic crisis the world is a powerful, Vietnamese industry developed slowly, with a growth rate of industrial production value (GTSXCN) low.

Commercial activities in the country

In the context of declining exports, the economic conditions were difficult, and commercial activities in the country are still certain difficulties. Total retail sales of goods and services will increase average monthly low, as of the end of the year more difficult, and this can last up to the end of the 1-2 quarter of 2013

Can draw the conclusion that, in the post-crisis conditions, when the main export market of Vietnam slow recovery and uncertainty, the domestic market of nearly 90 million people is a promising market power to local businesses continue to utilize, exploit.

2. Import and Export

Global economic recession has a significant impact on import and export of Vietnam, channel the impact of the recession is exported with a total annual export value equivalent to 60% of GDP. In 2009, Vietnam's export value, 7%, the decline was lower than that of most other developing countries, but made in 2009 became the first year export growth negative since Vietnam began economic reforms. Import value decreased by 14.7% reflecting the domestic demand for imported goods declined.

From the second quarter of 2009, when the world economy return to growth recovery with stimulus policies of the Government, import and export activities have been positive developments. However, due to rising demand for imported back while exports improved at a lower level, this leads to trade deficit increases, the trade deficit for 2009 at $ 12.2 billion USD, equivalent to 22% of the value of exports and 13% of GDP. Six months of 2010, the recovery trend in the major economies has been confirmed, although more slowly than predicted. The main export market of Vietnam Dien Bien also good although not really sustainable. Total exports of 6 months is estimated at 32 billion U.S. dollars, up 16% compared to the same period in 2009, completing 53% of the yearly plan. Strong recovery taking place in the labor-intensive industries such as textiles (17.2%), electronics (31.4%), fishing (14.2%). Meanwhile, imports have increased faster: 6 months of 2010 to $ 38.8 billion, an increase of 29.4% compared to the same period in 2009, the trade deficit stood at $ 6.8 billion (equivalent to 20.8% of the export value).

In short the European debt crisis and the U.S. led to a series of corollary: speed slow world economic recovery, may be W-shaped rather than V, especially the European region will see is unemployment and high inflation, euro depreciation, GDP growth declined, causing real income people and consumer demand for imports fell sharply.

In this regard, a number of the view that cheap goods are the advantages of Vietnam so that the debt crisis will help drive people to Europe from the high and intermediate goods to goods made in Vietnam production. However, the data calculated from the model estimates show that European debt crisis will have a negative impact on export and GDP growth in Vietnam, with a decline of about 1.7% GDP in 2010, the third highest after China (2.8%) and the UK (1.9%). So, if there is no timely response policies export support, the medium-term prospects for Vietnam's exports will face many difficulties.

3. Attract investment

Credit sources are becoming depleted of the world crisis has made investments directly and indirectly on the global recession and Vietnam is not an exception. FDI inflows after reaching record levels in 2008, fell to a low in 2009.

Six months of 2010, along with the recovery in world economic growth, FDI disbursement maintain modest pace, reaching about 50% of the annual plan while ODA disbursement reached 57% of the plan. FDI disbursement per month averaged $ 900 million, an increase of 6% compared to the same period in 2009. However, FDI is not really the breakthrough when the amount of registered capital of only 1/3 year plan. However, FDI has a positive when there is a significant improvement in the capital structure by industry. Foreign investment in the service sector, high-tech manufacturing and replace the field of hotel and real estate to become the main field. In the first 6 months of 2010, industrial processing and manufacturing sector is attracting the attention of foreign investors with 164 projects, total investment of 2.87 billion U.S. dollars, accounting for 34% of total FDI registration.

In addition, indirect investment (FII) was significantly improved compared to last year, although still far below the peak of 2007. According to the State Bank, FII inflows continue the trend surplus after a deficit in 2009. In the first six months of 2010, net FII surplus of $ 1.8 billion (including 800 million Foreign investors net buyers in the stock market).

In the long term, along with the confidence of investors in the global economic growth is strengthening and development potential of the Vietnamese market, FDI and FII inflows into the country will be more positive outlook. To promote the benefits from FDI, should focus on attracting capital associated with the restructuring plan the economy. In particular, measures to diversion of FDI in key areas with high added value, associated with the transfer of modern technology and manufacturing industries have a large proportion of exports.

ODA: On the basis of the positive comments about the Vietnam deal well before the economic crisis, the ability to recover quickly and will soon regain growth momentum, investors have committed a capital a record $ 8 billion in 2010. This is a good sign but also poses many challenges in the effective use of loans, calculate the associated conditions and correlated with other domestic and foreign capital. In addition to the problem of debt should be considered carefully because Vietnam is the debt ratio to GDP at 39%, increasing pressure to repay the money continues to depreciate, the yen and the euro rose high, while Japan and the EU is the most important donor countries.

4. Financial – Banking

Interest rate movements

With the evolution of the world economic crisis from 2008 to 2009, simultaneously with the debt crisis of 2010, even as the economy has stopped declining but still firm, to strengthen the recovery of the economy, many central banks in developed countries remain low interest rate floor and accept historical inflation to some extent. Base rate approaching 0% in most countries: the Federal Reserve (U.S.): 0.25%; ECB (EU): 1%; BOE (UK): 0.5%; Japan to 0.1%.

Base rate, after rising 1% to 8% from December 2009 was unchanged in the first seven months of 2010. Ceiling after the central bank lifted interest rates by 150% basic rate, lending rates of commercial banks increased from 2 - 3%. Enterprises to borrow capital at interest rates of about 14-16% / year with short term and about 14.5 to 17% / year for the medium term and long term. Interest rate of bank capital has been maintained at a high level, particularly banks listed interest rates to 11.99%, or together with other forms of promotion.

If inflation estimate for 2010 is less than 10%, the business must meet the rate of return on 24-27%, is higher than the rate of return on average equity of the sector in 2009 (about 20%).

Low credit growth

Credit needs of medium-and long-term no signs of improvement due to higher interest pressure profitability, many commercial banks aims to develop short-term credit. However, this is not easy. Debt crisis negative impact on the European economy, affecting the growth of the country. Exports to the EU market of Vietnam shrinking. In fact, the bank has the best incentive to spend efforts in the field of export business, but before changes in current operation of the export business difficult, with an agreement rate of 12 - 12.5% / year in the business is also not boldly approach of business loans extended.

Trends in M & A in banking finance

In addition, the adverse and unstable recovery of the global economy has affected world stock markets thereby indirectly affecting the Vietnamese stock market, raising capital throughstock Exchange to increase its charter capital to VND 3,000 billion in 2010 to meet the regulations of the central bank and needs to raise capital to ensure the competitiveness of many commercial banks will be difficult. M & A trends in the NH-TC forecast vibrant in the future.

5. Stock market

Stock market which has always been considered as the thermometer of the economy, which the psychological factors very strong impact on the behavior of investors. If you look at the impact of the world financial crisis on the economy is nowhere evident and vivid as the stock market.

Not really phase recovery and growth

Market cooling phase and fluctuated in a narrow range: the Vietnamese stock market in the first six months of 2010 fluctuated in a narrow band on both floors so heavily dependent on the psychology of investors, as well as money flowing into the market in recent years due to macro-economic fluctuations. VN-Index reached a low.

6. Social security

The world economic crisis has a direct impact on the social security situation in the country, especially the loss of jobs and income decline. Before this situation, the Prime Minister has a policy to support for unemployed workers. In addition, a series of action plans to ensure the life of the people as the basic wage increase for workers in businesses and public officials; continued food assistance, support and facilitate conditions to stabilize people's lives; implementation of measures to reduce poverty; implementation of housing programs for the poor, social policy, housing for workers in the industrial parks, the in credit and incentives for pupils and students. In general, social security is regular care, people's life has improved.

Before the new developments of the world economy as well as in the country, the Government continues to make many important policies to address harmonization of goals: to curb inflation, stabilize the currency and financial marketseconomic growth, ensure social security. Operating trends of the economy are eager toward a goal of macroeconomic stability, sustain performance growth target in 2009 than in 2009. The major measures that the Government has set out: (i) restructuring the economy; (ii) improving the quality of growth primarily to improve investment efficiency and (iii) social security.

Conclusion

Financial and economic crisis has recently 'fired' by about 1/3 of the world's assets, but not so exhausted invested, whereas the world's idle cash flow is growing strongly withwhich was withdrawn from the European market, the United States after the last event. This cash flow select investment opportunities to bring high returns and low risk, what their hard earned Euro-American market and they believe that the market of emerging economies will bring the what they want. In Vietnam it has been ranked in the tiger of the emerging countries. It's a very good chance that we need to grasp because our country needs huge capital to restructure the economy and keep the level of development of the last year. Opportunities is entirely hand, if we prove the stability of the national economy as well as the ability to prevent inflation, currently at record levels in the region.

Negative consequences arising from the situation in the world, mainly in the area of ​​foreign trade. Of course, when the global economic difficulties, our exports will be difficult, with weak demand, competition on the world market will be more intense and with the high quality items without (compared with other competitive players) we will have to reduce prices.As a result, as soon as keep export volumes as before, but will reduce turnover (this argument does not apply to certain raw goods, especially agricultural products, the market price has increased rapidly during thethe last time). Devaluation of the dollar phenomenon has bad consequences, when the prices of the commodities on the dollar increase, which is imported inflation due to the phenomenon that we have to face.

European debt crisis also creates unpredictable changes in exchange rates. The euro continues to be downward pressure on the money market in general and the dollar in particular. Since the signs of serious crisis, the euro lost value relative to the dollar. There are, at the exchange rate of EUR / USD fell to 1.3 for the first time over the first year. In the short term, the dollar rose relative to the EUR will reduce the competitiveness of Vietnamese goods exported to the EU by the principal exports are priced in U.S. dollars. In addition, the dollar strengthened while Vietnam's trade deficit will put pressure on the country's foreign exchange reserves.

With significant impact on the economic experts have made recommendations for businesses operating in related areas: promoting export items are necessities, agriculture, forestry and fisheries,food processing, and value-added export products through improved product quality, increased competitiveness in the market ... for Vietnam's exports do not decline in value.

In addition, the need to improve the investment environment in the direction of open, transparent and ensure that the interests of investors as well as the macro-economic stability and infrastructure to enhance national prestige as well as limited decline in external resources to support economic development in the country. If there are specific solutions to address thoroughly the above issues, the challenges that Vietnam will become an opportunity for extensive integration into the global economy.