A brighter economic future

CA - Viet Nam should maintain macroeconomic stability in response to its new status as a middle income country, the Asian Development Bank said yesterday as it boosted the nation's 2010 growth forecast.

Viet Nam's economy was expected to grow 6.7 per cent in 2010, up from the bank's 6.5 per cent forecast earlier this year, following the Government's steps to stabilise the economy, the Manila-based bank said in its twice-yearly economic forecast.

The country's expected growth boost was in accordance with the expansion of Asian economies by 8.2 per cent, up from the previously estimated 7.5 per cent, as the region "recovered from the global (financial) crisis with remarkable speed and vigour", according to the report.

The bank also increased Viet Nam's growth forecast for next year from 6.8 per cent to 7 per cent. Inflation was projected to average 8.5 per cent this year, easing to 7.5 per cent next year on the assumptions that domestic macroeconomic stability is maintained and that global oil and commodity prices remain relatively steady next year.

Viet Nam, along with Thailand and Malaysia, would see an upswing in their exports, said the bank, which predicted Southeast Asian economies to grow 7.5 per cent in 2010, up from an earlier 5.1 per cent estimate.

Since the last forecast in April this year, "Viet Nam has consolidated its macroeconomic stability," the ADB Country Director for Viet Nam, Ayumi Koshini, told a press briefing in Ha Noi yesterday. "As a result, we are making upward adjustments in our growth forecast for both 2010 and 2011."

The steps taken by the Government to stabilise the economy had contributed to improvement in the external and foreign reserves positions, the Asian Development Outlook Update noted. With improvement in the capital account, the overall balance of payments would likely turn to a small surplus in the second quarter of 2010 after recording deficits since the start of last year. The bank predicted quick economic growth in the second quarter.

Viet Nam was recently upgraded to a Middle Income Country as the GDP per capita reached US$1,024. In order to prepare for the next ten year period as a new Middle Income Country, Viet Nam needed to be cautious about maintaining macroeconomic stability and effectively communicating relevant policies to the public while accelerating reforms, the bank said in its report.

The country is preparing a new 10-year Strategy and a new five-year Socio-Economic Development Plan as a new ‘middle income country'.

"It will be critical for Viet Nam to keep an eye on the global economic scene," said Koshini who warned that the transformation of China from the ‘factory of the world' to the ‘largest consumer market in the world' would certainly change the regional economic map, together with the establishment of the ASEAN Economic Community by 2015.

The bank advised the Government to continue its efforts to ensure a better public understanding of its policy stance, supported by greater and timely availability of information and statistics which should be applied not only to the Government but also to the corporate sector.

The ADB report noted that the two laws approved by the National Assembly in June 2010 – the laws on the State Bank of Viet Nam and on Credit Institutions – together with various legal documents issued by the State Bank of Viet Nam (SBV) and other agencies, marked important progress in strengthening the framework for monetary policy implementation and safeguarding the stability of the banking system.

The Asian Development Outlook and its Update are ADB's primary economic reports analysing the economic conditions and prospects in Asia and the Pacific. They are issued in April and September, respectively.