ADB: Vietnam’s slowing economy to bounce back in future

UB.CA/HCMC - Domestic inflation and global economic slowdown will force Vietnam’s growth to moderate to 7% in 2008, but the growth rate can rebound to 8.1% in 2009, the Asian Development Bank (ADB) said on April 2.

ADB Country Director Ayumi Konishi said that because Vietnam is bearing the brunt of the two above mentioned “storms,” its economy is predicted to slow down, however “the country’s medium to long-term economic prospects are bright”.

“Compared with the slowdown of other economies in the region, the 7% rate is not bad,” he said.

In the Asian Development Outlook 2008, also released the same day, the Manila-based bank predicts that Southeast Asia will slow to 5.7% in 2008 as its export prospects are expected to be dampened by the weakening of world demand.

The bank said the other factor adding to the projection is that Vietnam’s efforts to rein in inflation will hold back robust growth of the emerging economy that hit 8.5% last year.

“Growth is likely to speed up again as inflation goes down and macroeconomic stability is restored and hopefully the global economic environment is improving,” ADB Country Economist Bahodir Ganiev said.

Rapid increases in food and fuel prices as well as impacts from natural disasters have rocketed inflation in Vietnam to 15.7% by February 2008, compared with 6.6% in December 2006.

ADB said if there was no rise in the consumer price index from now till the end of the year, Vietnam’s inflation would be cut down to 9.2%.

Konishi urged the Vietnamese government to curb inflation in time before it turns out persistent without doing harms to the nation’s medium-term growth, increase the supply of skilled labour and remove infrastructure bottlenecks.

Instead of tightening public investment, Konishi recommended the government take measures to improve efficiency of public-invested projects, develop the management of strong foreign capital inflows and strengthen prudential regulations and supervision of banks.

Market-oriented reforms, especially in enterprise and financial sectors, are emphasised by the ADB country director as a decisive factor in regaining investors’ confidence and helping to pick up the economy.

The ADB’s forecast on Vietnam’s growth came one day after the World Bank said the country will grow by 7.5-8% this year, lower than last year’s 8.5%.