After witnessing spiking prices earlier in the year, officials are now worried about a possible deflation. The CPI has fallen for two consecutive months, according to the General Statistics Office, off 0.76 per cent in November and 0.19 per cent in October.

Consumer purchasing power is low, and exports are declining. The US, EU and Japan, which together account for more than half of Viet Nam’s export value, are all hard-hit by the global financial turmoil.

Le Quoc An, who heads the executive council of the Viet Nam Textile Group, warned that his group, which employs more than 2 million workers making products mainly for export, would lay off 15 per cent of its workforce next year unless drastic measures were taken.

Many enterprises, particularly small- and medium-sized enterprises (SMEs), were facing difficulties. In HCM City alone, 14 enterprises have closed down, leaving more than 4,000 people jobless, according to the municipal Department of Labour, Invalids and Social Affairs.

"However difficult it could be, we must maintain a GDP growth rate of 6.0 per cent to ensure employment for 43 million people. A GDP lower than that will negatively affect social security," Prime Minister Nguyen Tan Dung told more than 100 economic groups and corporations in Ha Noi on December 16 .

"Let’s imagine the world financial crisis is like a storm. It has landed in Viet Nam late, but it could stay long with heavy consequences," said former minister of planning and investment Tran Xuan Gia. "Therefore, immediate measures should be taken to limit its destruction."

Rather late

Acting World Bank country director Martin Rama said Viet Nam had responded rather late to the global financial storm, but not too late, saying its responses had been well considered.

Nations should have quick, accurate and flexible reactions, he said, because the world economic situation, while taking place swiftly, would have profound and widespread impacts.

Deputy Prime Minister Nguyen Sinh Hung said on December 14 in Ha Noi that the Government would raise the amount of the stimulus package to $6 billion at its year-end session later this month, demonstrating the Government’s determination to maintain growth next year.

The key to the stimulus is now how best to use the money so it has the quickest and most effective possible impact.

Both State and non-State establishments would be eligible to participate, in line with international law and principles, said Prime Minister Dung. The plan would be destroyed if favouritism were applied, he said, or if only those with a "louder voice" were given priority.

"Entrepreneurs should never dream of getting any of the money through bribery," said Nguyen Trong Tin, head of the Department of Infrastructure and Urban Areas under the Ministry of Planning and Investment.

"This is an urgent Government measure to limit the economic downturn. If we do not do our best, we will be guilty before the people," Tin said.

Transparent choices must be made in selecting the right beneficiaries, said Vo Tri Thanh, director of the Central Institute for Economic Management’s Department for International Integration Studies.

Funds drawn from the national foreign reserves would be loaned at preferential interest, Minister of Planning and Investment Vo Hong Phuc said, noting the US example of possibly extending loans to the auto industry.

The ministry would work out criteria to make the right choices and meet targets, Phuc said.

The Ministry of Construction has already submitted a plan that would use VND2.5 trillion ($118 million) to stimulate demand in construction and real estate. The ministry said if the plan was approved, 10,000 apartments would be built providing accommodation for 60,000 workers and low-income households in Ha Noi and HCM City.

This would generate thousands of jobs and help boost the demand for steel at a time when the steel industry has surplus supplies of about a million tonnes. Makers of cement and other building materials were also facing a stagnant market.

Many SMEs have halted production, meanwhile, due to low demand, and many enterprises have been weakened by their inability to attract investment or access credit.

The SMEs alone account for 97 per cent of all enterprises and contribute substantially to the nation’s gross domestic product (GDP).

Farmers hard hit

Farmers – who account for more than 80 per cent of the nation’s population – have also been hard hit by the economic downturn. Farmers in the Mekong River Delta have unsold rice amounting to more than a million tonnes.

Domestic consumption needs to be promoted. The banner "Be Vietnamese, buy Vietnamese" should be raised. Banks need to more freely extend personal loans to spur consumer demand, which would in turn boost production, infrastructure construction and more.

More details about the economic stimulus plan are expected at the Government year-end meeting.