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The Vietnam News

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World slowdown may hurt rapid Vietnam growth

HANOI - Vietnam's rapid economic growth could slow slightly this year because of the global financial crisis, the head of the Asian Development Bank said on Friday. Haruhiko Kuroda told a news conference in Hanoi that a "slight slowdown" towards 8 percent from 8.5 percent in 2007 "could be useful, even productive, for the Vietnamese economy to contain inflationary pressures."

Inflation is well above the trend in other Asian emerging markets, hitting 14.1 percent in January compared with January 2007 and the highest since Nov. 1995. Economists say prices of commodities, such as oil, food, food-related costs, housing and transportation are driving inflation. Kuroda, who was Japan's top financial diplomat from 1999 to 2003, said monetary policy should be "appropriately and if necessary further tightened to contain inflation." He said he expected Vietnam's inflation for all of 2008 would fall to between 7 percent and 8 percent. Previously, the ADB had forecast 2008 inflation at 6.8 percent.

The central bank raised interest rates from Feb. 1 by up to 1.5 percentage points to contain credit growth and inflation, the first change in three main interest rates since December 2005. The State Bank of Vietnam has since tightened monetary policy further by issuing compulsory dong treasury notes worth $1.3 billion at a coupon of 7.8 percent, effective March 17. "I conclude my visit with a great sense of hope and optimism about Vietnam's future," Kuroda said after meeting senior leaders of the Communist Party government and private sector business executives during a three-day trip. "The Vietnamese economy, like other economies in Asia, could be affected by the global economic slowdown," Kuroda said. He said Vietnam's GDP growth, one of the fastest-expanding economies in the world after China, could still attain growth of 8.5 percent to 9 percent in the medium to long term. The previous ADB forecast for 2008 growth was 8.5 percent.

The government has set a GDP growth target for this year of between 8.5 percent and 9 percent as it steers its programme of market-orientated policies, which included joining the World Trade Organisation a year ago.

Reuters - February 21, 2008.