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TAQ1609.003 ADB: VN needs to stabilise economy for robust 2010-2011
The Asian Development Bank (ADB) said on September 16 that Vietnam needs to continue measures to stabilise its economy, even to slow growth in 2009 to be better prepared to resume strong economic growth in 2010-2011.
This was announced following concerns that Vietnam may be tempted to loosen its fiscal and monetary policies and boost public investment in an effort to spur the economic growth rate again as price pressures are projected to ease, along with a slowdown in growth and a narrower trade deficit.
“It should be clearly realised that there is a trade-off between the growth target for next year and the growth potential for ensuing years. Vietnam should be patient in shifting its policies towards economic recovery,” ADB Country Director for Vietnam Ayumi Konishi said at the launch of the Asian Development Outlook 2008 Update (ADO Update).
He added that targeting a lower growth rate of 6% next year, as compared to the projected 2008 growth of 6.5%, will provide more solid foundation for economic growth in 2010 onwards. However, he warned that although there have been the improvement in economic statistics in recent months, “in absolute terms, inflation and the trade deficit are still very high and it will still take some more time to firmly stalibise the situation.”
According to the ADO Update, inflation rates in 2008 and 2009 are estimated at 25 percent and 17,5 percent, respectively, while the current account deficit for this year is now seen at 13.5 percent of GDP and for 2009, 7 percent GDP.
The report noted that the State Bank of Vietnam needs to continue strenthening its prudential supervision of banks and – should any bank become financially distressed – act swiftly to prevent a systemic banking crisis.
Besides, efforts should be made to overcome challenges such as lack of availability of timely key data, temptation to loosen monetary and fiscal policies prematurely and weakness in capital absorptive capacity, said Economist, Governance and Public Sector Reform Officer of ADB Dao Viet Dung.
Despite near-term risks and challenges, “We strongly believe that Vietnam’s medium to long-term economic prospects remain good” with moderate external debt burden, rising foreign direct investment (FDI) inflow, and significant growth potential, ADB Country Director Ayumi Konishi said.
VNA
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