Vietnam's Inflation Curbed

 

According to ADB, Vietnam’s economy will maintain a healthy GDP growth rate of 8.3 per cent this year and 8.5 per cent in 2008. "Those who expect a miracle from Vietnam’s WTO membership may have another judgment; but Vietnam has made great progress in economic development and reform," said Mr Ayumi Konishi, ADB’s country director in Vietnam.

 

"Strong investment and consumption have helped stimulate high economic growth in the first half of this year. The increase in imports, mainly of machines, equipment and raw materials, a kind of investment, has expanded the trade deficit more than expected; however, this is still not a matter of concern. The rising inflation will require the Government to take urgent measures, but we think the country’s inflation is still under control,” Ayumi Konishi added.

 

Doctor Omkar Shrestha, ADB’s deputy director and chief economist in Hanoi said that Vietnam’s economic growth rate has increased to 7.9 per cent in the period between January and June, 0.5 per cent higher than the 7.4 per cent the previous year. In principle, GDP will sharply rise in the second half the year due to increasing budget disbursement, while economic growth for the whole year is estimated at 8.3 per cent, unchanged from the forecast in ADO 2007.

 

Vietnam’s economic growth stems from the industry and services sectors. Moreover, the private sector is acknowledged to have growth of 20.5 per cent, double that of state-run enterprises. Among economic sub-sectors, production has seen a sharp increase of 12.4 per cent, while mine exploitation has had low growth, with a decrease of 7.4 per cent in crude oil exploitation as crude oil output in Bach Ho mine, the largest mine in Vietnam, has fallen. Services, trade and finance has grown 10.4 per cent and hotel and restaurant has soared by 12.7 per cent, thanks to increasing growth in consumption and tourism.

 

In terms of supply, strong investment and consumption was considered a driving force for economic development in Vietnam. Investment grew 14 per cent in the first half of 2007, encouraged by Vietnam’s WTO membership and improvement in Vietnam’s business environment. Investment growth stemmed mainly from the domestic private sector, contributing up to 35 per cent to the country’s general investment in the first six months this year.

 

Strong investment led to the sharp increase of 30.4 per cent in goods imports in the first half, with growth of 46.5 per cent in machines and equipment imports. The import of raw materials and intermediate goods also reported a strong increase. In terms of export, after joining the World Trade Organisation, Vietnam’s export of apparel and garments rose by 25.9 per cent in the January-June period. After cancelling export quotas, woodwork exports also rose 23 per cent.

 

"The Vietnam’s access to the WTO will help integrate the country’s economy into the global business network, encouraging foreign direct investment and keeping stimulation for domestic reform, Vietnam’s economic growth is expected to rise to 8.5 per cent next year," said Mr Konishi.

 

The report also forecasts that with strong growth in the two sub-sectors of production and construction, industry is estimated to grow 10.6 per cent in 2008. The service sector, encouraged by high demand for consumption and tourism as well as the opening of some sectors to foreign investors, is expected to grow 8.6 per cent next year. With the benefits from Vietnam’s WTO membership, trade is forecast to maintain export growth of 22 per cent in 2008. 

 

The inflation rate will be kept at 7.8 per cent in 2007, and reduced to 6.8 per cent in 2008. Although this inflation rate is high and requires the Vietnamese government to take urgent measures, the situation is still under control. "We hope that the new government will focus on improving the implementation of projects by simplifying administrative procedures," Konishi emphasised.