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Vietnam reports faster growth as Asian economy figures improve
Vietnam’s economic growth accelerated in the second quarter, buoyed by construction activity, amid indications of a broader regional recovery.
The country’s gross domestic product grew 3.9 percent in the six months through June compared to a year earlier, after gaining 3.1 percent in the first quarter, the General Statistics Office in Hanoi said. The economy expanded 4.5 percent in the second quarter from a year earlier, according to Wednesday’s statement.
Stronger economic expansion in Vietnam adds to evidence that Asia may be starting to emerge from the worst of the global recession. Stimulus spending that the Vietnamese government values at more than US$8 billion has helped drive loan growth in the country, spurring construction.
“The one common factor in the improvement in the Asian growth numbers is aggressive growth in liquidity,” said Ken Peng, a Beijing-based economist at Citigroup Inc. “Vietnam has taken measures to encourage loans. The impact in Asia of stimulus spending can probably sustain better growth conditions for the rest of this year.”
Japan’s economy will expand at an annual 2.3 percent pace in the second quarter, according to a Bloomberg News survey, after contracting a record 14.2 percent in the first. South Korea’s finance ministry last week forecast GDP will increase almost 2 percent in the second quarter from the previous three months, when it expanded 0.1 percent.
The Organization for Economic Cooperation and Development on June 24 raised its forecast for its 30 member nations for the first time in two years as the global recession shows signs of abating. The International Monetary Fund last week boosted its outlook on Australia for this year and next.
Worst is over
Vietnam has averaged 7.5 percent annual economic growth since the beginning of the decade. Last year, the $90 billion economy expanded 6.2 percent, the slowest pace since 1999.
“Based on the amount of job-related activity such as employers advertising positions, on hiring freezes being lifted and on work we’re doing with clients, it feels as if the worst has passed,” said Jonah Levey, chief executive of Ho Chi Minh City-based recruitment and human-resources consultant Navigos Group. “In our mid-level professional recruitment practice, we’ve seen an uptick the past two months.”
The industry and construction component, which makes up 39 percent of Vietnam’s economy, grew 3.5 percent in the first half. Construction alone grew 8.7 percent.
‘Dramatic increase’
A sharp drop in the cost of cement and steel has led to a “dramatic increase in construction activity” compared with six months earlier, the World Bank said in a June report.
“In the last two months, the market for steel has been quite strong, and in developing economies like Vietnam, a large percentage of steel goes into construction,” said Robert Santurbano, general manager of steel distributors Italinox Vietnam Co. in Hanoi.
Services, which make up 38 percent of the economy, expanded 5.5 percent, as financial services grew 6.4 percent. Total outstanding loans increased 15 percent this year through mid-May, Deputy Prime Minister Nguyen Sinh Hung told the opening of the country’s National Assembly on May 20, citing a loan subsidy program begun this year to stimulate the economy.
Agriculture, forestry and fisheries, which account for 22 percent of the economy, expanded 1.3 percent, with agriculture alone growing 0.8 percent.
IMF forecast
Vietnam’s government has cut its growth target for the year to 5 percent from 6.5 percent amid contractions in economies that buy many of the Asian country’s exports. The revised target is still seen as optimistic by the International Monetary Fund, which is predicting a 3.5 percent expansion.
“The question is, at what cost would they be able to achieve 5 percent growth?” said Jonathan Pincus, an economist with the Vietnam Program at the Harvard Kennedy School in Ho Chi Minh City, citing the risk that government stimulus spending that has boosted credit growth may push up prices and weaken the Vietnamese dong.
“If fortune smiles on Vietnam and external demand picks up, they could achieve 5 percent, but the priority now should be on macroeconomic stability,” he said. “The worst thing that could happen now would be a return to inflation and exchange-rate instability.”
thanhnien, bloomberg
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