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Vietnam’s economy may return to 7 pct growth by 2010, S&P says
Vietnam’s pace of economic expansion will probably return to at least 7 percent annually by 2010 if global growth has revived by then, according to Standard & Poor’s Ratings Services.
Vietnam’s “prompt and forceful” response to economic overheating earlier in 2008 reassured investors and supports a return to an average growth of 7 percent “in the medium term,” S&P said Thursday. The company rates Vietnam’s foreign-currency debt BB, two levels below investment grade.
Prospects of a return to faster growth may revive investor confidence that has flagged recently, as the International Monetary Fund warned of a slowing economy and government figures showed exports and tourism are slumping due to a collapsing global demand. The weakened investor confidence saw Vietnamese stocks drop to a three-year-low.
Constraints facing Vietnam are not “serious enough to dampen growth to below 7 percent over a cycle,” wrote Kim Eng Tan, a primary credit analyst at S&P in Singapore, in an e-mail response Thursday to questions from Bloomberg News.
“As soon as global conditions improve, it should
be able to return to its trend growth level,” he said. “At this time, it seems likely that global growth will pick up again some time late in 2009. So, by 2010 Vietnam should see 7 percent or above growth again.”
The economy has posted average annual growth this decade of 7.6 percent, with the rate exceeding 7 percent every year since 2002. The government expects growth to slow to 6.7 percent in 2008 and 6.5 percent next year, while S&P sees expansion of 6.4 percent this year followed by 5.1 percent in 2009.
Some analysts have warned that investors are overly optimistic about the potential of the Vietnamese economy, with Credit Suisse AG saying in September that the country’s gross domestic product may expand by as little as 6 percent annually over the next five to 10 years.
Still, Vietnam’s growth prospects are boosted by strong levels of foreign investment that have strengthened reserves, S&P said in its update on the country’s rating.
While Vietnam has faced accelerating inflation and a surging current-account deficit, government measures have “prevented macroeconomic imbalances from worsening,” S&P said.
Bloomberg
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