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Positive growth, but challenges remain
Viet Nam is very likely to achieve an annual growth rate target this year of 6.5 per cent, despite some macro economic risks, Vo Tri Thanh, deputy director of the Central Institute for Economic Management, has said.
The target was set by the Government and approved by the National Assembly earlier this year.
The cabinet meeting in August predicted that Viet Nam would grow at 6.7 per cent, backed by strong growth in the last two quarters.
Thanh said the target was very possible to realise because the Government had implemented favourable macro economic growth policies, and Viet Nam could benefit from the global economic recovery in the coming months.
Several experts and economic institutions shared the same positive perspective. Standard Chartered Bank specialists, in their latest outlook on the Vietnamese economy issued in September, forecast that Viet Nam would achieve a GDP growth rate of 7.5 per cent in the last quarter of the year.
This would mean annual GDP growth for 2010 would reach 6.7 per cent.
While the GDP growth rate forecast is not higher than previous projections, the outlook in terms of inflation is more positive, reducing from 11.5 per cent to 8.5 per cent for 2010.
Standard Chartered Bank expects that Viet Nam will grow at 7.2 per cent during 2011.
Le Xuan Nghia, deputy director of the National Committee for Economic Monitoring, said there was a very high likelihood that Viet Nam would attain an annual GDP growth rate of 6.7 per cent by the end of this year.
But he expressed concern over current interest rates.
"The current interest rate is too high for enterprises to access bank loans," Nghia said at a seminar on the effects of the global financial crisis on the Vietnamese economy held in HCM City this week.
The IMF's latest assessment of the Vietnamese economy also forecast sustained recovery.
"If these favourable conditions [government's macro economic policies] are sustained, the Government's objectives for 2010 appear within reach. We project real GDP growth at 6.5 per cent, supported by a continued recovery in private investment, consumption, and non-oil export growth," said IMF Staff Representative at the Viet Nam – Informal Mid-year Consultative Group Meeting in June.
The Asian Development Bank (ADB) in its monthly Asia Economic Monitor for July 2010 forecast that Viet Nam would achieve annual GDP growth of 6.5 per cent in 2010 and 6.8 per cent in 2014.
"Growth in the first half of 2010 indicates Viet Nam is on track to achieve its targeted 6.5 per cent growth for the year," the ADB said in its monthly economic review.
"Expected annual GDP growth in 2010 will range from 6.5 – 6.8 per cent," said Pham Thanh Binh, head of Research, PetroVietnam Securities.
Macro-economic risks
Thanh said despite positive economic indicators, policymakers needed to pay closer attention to the risk of macro-economic instability.
"Most of the inflation forecasts are around 8 – 8.5 per cent, which is still a high figure," he said.
At the beginning of the year, the National Assembly expected the annual inflation not to exceed 7 per cent. The Government after that extended the target to 8 per cent.
Other indicators such as the balance of trade and State budget deficit have seen positive changes; but those are short-term results and can prove volatile due to the impact of international factors.
The IMF also issued similar warnings. "The current favourable conditions are still fragile, and confidence that recent macro-economics stability will be sustained remains weak," the statement said.
Thanh argued that the key issue in the Vietnamese economy did not totally lie in inflation figures or trade deficit but it was also about the consistency of the Government's policy message.
"Economic policies have been see-sawing between prioritising economic growth and stabilising the economy, which in some ways has lessened policy predictability and investor confidence," Thanh said.
The IMF statement also called for more consistency in economic policies.
"Much of the current uncertainty over the short-term outlook stems from mixed signals over the direction of monetary and fiscal policy in the immediate period ahead," IMF statement in June said.
"The Government message seems to be that it intends to continue sustaining economic growth while paying particular attention to stabilising the macro-economy," Thanh said.
vietnamnet, vietnamnews
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