Vietnam - Vietnam's economic growth rate to fall to 5.7% this year: World Bank

Vietnam's economic growth this year is expected to reach around 5.7 percent before increasing to 6.3 percent next year while year-end inflation is forecast to decline to below 10 per cent.

The World Bank yesterday released its latest East Asia and Pacific Economic Update report in Hanoi, saying that while the economy has started to stabilise, the significant tightening of macroeconomic policies along with an uncertain global economic environment were beginning to take a toll on growth.

World Bank Lead Economist Deepak Mishra said real GDP growth decelerated from 6.8 per cent in 2010 to 5.9 per cent in 2011 and further to 4 per cent in the first quarter this year as domestic demand slowed, affecting construction, services and utilities.

Mishra added that tightening domestic policies have dampened investment, particularly in infrastructure, real estate and private consumption.

Thanks to a combination of these measures and falling food prices, inflation declined to 10.5 per cent year-on-year last month from a peak of 23 per cent in August 2011, he added.

He said that export was the lightest point of the economy as most countries in the world saw a decrease while Vietnam's exports in the first quarter were 23.6 per cent higher compared to the same period last year.

Key labour intensive manufacturing exports such as garments, footwear and furniture continued to grow at 14-18 per cent in the first three months of this year.

He said countries in these areas should diversify their export markets.

World Bank Country Director to Vietnam Victoria Kwakwa said the Government was making efforts at fiscal consolidation. The budget deficit was expected to widen by 6 per cent of GDP this year.

The report also said Vietnam's public debt was likely to remain sustainable if economic recovery continues and authorities remained on the current path of fiscal consolidation. The World Banks Low-income Country Debt Sustainability Analysis showed that Vietnam remained at low risk of debt distress.

It said the largest source of uncertainty to debt sustainability came from implicit obligations to State-owned enterprises, which were not captured under Government and Government-guaranteed debt statistics.

Greater transparency and disclosure of information was critical to building confidence among market participants.

Vietnam's near-term policy challenge is to maintain macroeconomic stability and restore confidence among investors, while also addressing longer-term structural reforms.

Bert Hofman, World Bank chief economist for East Asia and the Pacific, said in Tokyo that as external demand was likely to remain weak, countries in developing East Asia and the Pacific needed to rely less on exports and more on domestic demand to maintain high growth. Already, many countries were moving in this direction, but there was further scope for rebalancing.

VietBiz24

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