Vietnam to See Robust Growth: ADB

The country will maintain robust economic growth of 7.8 per cent and 8 per cent in 2006 and 2007 respectively and inflation is forecast at 5 per cent and 6 per cent, said the Asian Development Bank (ADB).

 

The Vietnam Residence Mission (VRM) on April 6 released the ADB’s annual report on Asian Development Prospects in 2006 whereby particularly emphasizing Vietnam’s economic outlook.

 

According to the ADB, such growth is relatively high. Sustainable development of foreign direct investment (FDI), inflow of overseas remittance and revenue from services will expectedly maintain the impetus for domestic demand.

 

Given the next five year prospect, the ADB believes that such targets as economic growth of 7.5-8 per cent, poverty reduction of 15-16 per cent, industrial growth of 10.2 per cent, services of 8.2 per cent are achievable in Vietnam.

 

In the 2006-2010 period, total investment of the whole economy will account for 38.5 per cent of the GDP of which more than half is from foreign and domestic private sectors compared to 46 per cent in the 2001-2005 phase.

 

Vietnam has further improved its business environment and official recognition of the private sector’s contribution to the economy has been increasingly explicit, presenting more outlooks for further reforms toward a market-based economy, said the report.

 

New investment laws will offer more incentives to entrepreneurs.

 

Additionally, the equitization of the Bank for Foreign Trade of Vietnam (Vietcombank) and the MobiFone, if successfully, will represent the Government’s commitments in promoting business efficiency and development of the private economic sector.

 

The apparel sector will continue witnessing tough competition from China and other rivals until the country enters the World Trade Organization (WTO) when export quotas to the US will be lifted.

 

The construction field will likely continue growing steeply with large investments into developing industrial, tourism and real-estate sectors as well as infrastructure.

 

Service sector will have more growth momentum when the APEC Summit will be to held in November 2006.

 

In addition, the country will see agricultural growth of 2.7 per cent in the next two years, lower than four years ago because prices of some farm produce will possibly decline.

 

The ADB also anticipated that exports will be likely to record a slightly lower growth compared to recently because prices of some products such as rice in the world market are expected to plunge. Anti-dumping duties on bicycles, footwear and wooden products levied by the EU will impact Vietnamese exports.

 

This year, import prices of some goods, particularly steel and fertilizers, are projected to decline, accordingly, import expenditures will expectedly continue being controlled like last year.

 

Together with significant surges of overseas remittance inflows and service revenues, the aforementioned tendencies will be likely to help the country control its current accounts deficit.

 

Efforts in reining in credit growth and projects on declines in prices of some products in the world, especially rice and other foods, will partly lessen inflation pressures. Inflation pressure is attributed to an increase in fuel prices and salaries.

 

The country’s fiscal policy is expected to continue supporting economic growth as revenue from trade taxes may go down in the forthcoming time when Vietnam opens up its market.

 

The ADB also hopes that the country will join the WTO this year, pertaining impetus toward domestic reforms. Moreover, AFTA and WTO membership will promote the competitiveness capacity of the economy when new technologies are introduced into production and productivity is improved.

 

The report also warns of risks for Vietnam economic outlook, namely, the Government’s failing to fulfill commitments on reforms and fighting against corruption. However, the ADB admitted the risks appears low upon considering the country’s efforts in realizing its commitments, reforming state owned enterprises and controlling corruption.

 

Additionally, power shortage is a potential risk regarding electric demand growth of 14-15 per cent annually, said the report, adding that heavy reliance on hydropower which accounts for 56 per cent of the country’s power supply, leaves the energy sector vulnerable.

 

According to the report, the country’s economic growth of 8.1 per cent last year, although some 0.3 per cent lower than the Government’s target, was still a sound achievement amidst bird flu, droughts and growing import prices of some products.