Vietnam Growth Likely to Grow 5.2 Percent

The WB cut its economic growth forecast for Vietnam in 2012 to 5.2 per cent and in the next year to 5.7 per cent, both down 0.5 per cent from its estimate in May.

The WB said that Vietnam’s investment growth has eased this year because the country focused on taming inflation in 2011 and the first half of this year. This trend can be improved in the last half of this year when Vietnam’s policies become more adaptable.

 

The report said economic growth in the East Asia and Pacific region may slow down by a full percentage point from 8.2 per cent in 2011 to 7.2 per cent this year, before recovering to 7.6 per cent in 2013. Growth in developed countries will remain modest, with recovery in the region to be driven mainly by strong domestic demand in developing countries.

 

Weak exports and lower investment growth will cut down China’s GDP growth from 9.3 per cent in 2011 to 7.7 per cent this year. In 2013, however, China’s growth is expected to rebound to 8.1 per cent as the impact of stimulus measures kicks in, supported further by an uptick in global trade.

 

"The East Asia and Pacific region’s share in the global economy has tripled in the last two decades, from 6 per cent to almost 18 per cent today, which underscores the critical importance of this region’s continued growth for the rest of the world,” said World Bank Group President Jim Yong Kim.

 

“Even under difficult global circumstances, poverty in the region will continue to decline, with the share of people living on US$2 a day expected to reach 24.5 per cent by the end of 2013, down from 28.8 per cent in 2010,” said Pamela Cox, World Bank East Asia and Pacific Regional Vice President. “Weaker demand for East Asia’s exports is slowing the regional economy, but compared to other parts of the world, it’s still growing strongly, and thriving domestic demand will enable the region’s economy to bounce back to 7.6 per cent next year.”

 

The report cited reconstruction spending in Thailand after last year’s floods as among the factors buttressing domestic demand in the region. In addition, countries like Indonesia - together with Thailand and Malaysia - are currently enjoying a boom in spending by their governments and the private sector on capital goods.

 

The report noted that tensions in the Eurozone have eased following the European Central Bank’s (ECB) announcement to defend the euro in July and the launch of its bond-buying programme that significantly calmed the markets. Also, the recent announcement by the United States Federal Reserve (FED) regarding a new round of quantitative easing (QE3) to help stimulate the American economy, has helped revive the global equity markets.

 

However, the report said that considerable downside risks remain. Should conditions in Europe deteriorate sharply, the risks are high that developing economies might be affected. A crisis in the Eurozone will adversely affect the economies in the East Asia and Pacific mainly through trade and links to the financial sector. The report considered food price increases less of a risk for East Asia at this stage, as rice markets remain well supplied.

 

Policy makers in the East Asia and Pacific Region will have to continue managing growth and reducing poverty in an environment that will remain volatile, it said. Countries that have experienced rapid expansion of credit need to be cautious, while exporters of commodities should continue to take measures and build institutions that help manage volatile commodity revenues.

 

“Over the medium term, increases in productivity in the East Asia and the Pacific, which is increasingly becoming a middle income region, will drive growth. Continued structural reforms, improvements in the business climate and investments in infrastructure and education systems will become more important, said Bert Hofman, World Bank Chief Economist for East Asia and the Pacific.