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Vietnam economy to expand 5.7 pct this year: ADB report
Vietnam’s economic growth would slow to 5.7 percent for 2012 before picking up to 6.2 percent next year, the Asian Development Bank said Wednesday, calling for structural reforms to secure stable growth.
Average inflation could ease to just under double digits, providing policy settings are kept sufficiently firm, but then it is expected to quicken to 11.5 percent in 2013, the Manila-based lender forecast in its Asian Development Outlook 2012 report. The economy expanded 5.89 percent last year.
“To support flagging economic growth, the authorities have slightly loosened monetary policy in early 2012, and signaled that further easing is likely if inflation trends down,” the bank said. It warned that with inflation still double-digit and foreign reserves at a low level, the near-term outlook could be at risk if the government lowers interest rates too quickly.
Vietnam cut its interest rates for the second time in less than a month on Wednesday. The refinancing rate was reduced by 1 percentage point to 13 percent, and the discount rate by the same amount to 11 percent.
“Rapid credit growth in recent years, followed by the credit squeeze in 2011 and exacerbated by downturns in the property and equities markets, have added to stresses for banks,” ADB said in the report. It commended plans by the government to restructure the financial sector but noted that funding and timing of bank recapitalization have not been disclosed in detail.
“Safeguarding the banking sector should be the immediate priority. The longer-term requirement is to develop a diversified and efficient financial system that can mobilize the funding to meet the 7-8 percent economic growth target,” said Tomoyuki Kimura, ADB Country Director for Vietnam. “These complex reforms, which will take years to complete, would benefit from coordination with the proposed restructuring of state-owned enterprises."
“Increased transparency of the financial performance of state enterprises would provide a strong signal to the market that the government was committed to reforms,” he said.
Thanh Nien
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