The World Bank on November 4 became the latest major institution to raise its forecast for growth in Vietnam.
The Washington-based World Bank said in its latest “East Asia and Pacific Update” which is published twice a year that Vietnam economy navigated the crisis relatively well and raise forecast for its GDP growth.
“The global financial crisis and economic recession slowed economic growth in Vietnam”, the report said citing the downtrend in Vietnam’s exports and manufacturing in 2008 and especially GDP growth rate.
Over the first eight months of 2009, exports declined by 14.2% and imports fell 28.2% on year in dollar terms resulting in the current account deficit of about 5% of the GDP in 2009, down from 11.9% in 2008, the report said.
Foreign exchange reserves declined to about US$16.5 billion by August 2009 from US$23 billion at the end of 2008. The fiscal deficit is expected to widen to 9.4% of GDP in 2009, reflecting a decline in revenues and a significant increase in expenditures, the report said.
The most apparent effect is seen in a GDP growth of 3.1% in the first quarter of 2009, 4% than average Q1 of last few years, the report said.
“However, positive signs of recovery have been emerging as a result of the government efforts to support economic activity”, the World Bank said, citing Vietnam government stimulus package which included various measures, from an interest rate subsidy, to tax breaks, and to additional capital spending.
Monetary policy has been loosened substantially to support domestic demand after a period of tightening in 2008 to tackle overheating. The central bank cut its policy rate by half to 7% from mid-2008 to February 2009. The policy rate cut, together with the interest rate subsidy, has led to accelerated bank credit growth.
As a result, GDP grew by 4.5% in the second quarter and 5.8% in the third, raising real GDP growth to 4.6% year-on-year for January-September.
While manufacturing sector is still facing tough challenges because of falling demand, the construction sector is a leading factor of the recovery, with value-added in the sector projected to reach a double-digit growth rate for the whole year. Domestic consumption is also an important factor of the recovery process, with retail sales increasing 9.3% in real terms during January-August from a year earlier.
Poverty levels continued to fall in Vietnam with considerable recent progress in rural development it said.
The World Bank forecasts a growth rate of 5.5% for 2009 as a whole, or more than 2 percentage points below the trend, believing that Vietnam’s economy navigated the crisis relatively well. (World Bank)
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