Vietnam 2010 trade gap seen at $13.5 bln

HANOI - Vietnam on Wednesday projected a stubbornly wide US$13.5 billion trade deficit this year despite a rise in exports of 19.1 percent, three times the initial target, adding to pressure on the authorities to devalue the dong again.

Prime Minister Nguyen Tan Dung, reading a report to the opening session of the National Assembly, also forecast economic growth of 7.2 percent in the fourth quarter from a year before, after 7.16 percent in the third quarter.

The government report seen by Reuters forecast gross domestic product would rise next year by between 7 percent and 7.5 percent, following a projected 6.7 percent this year.

This year's projected trade deficit would be up 9.8 percent from the $12.3 billion gap in 2009. A Reuters poll of 12 economists this month had forecast $12.2 billion for this year.

Vietnam's large trade and budget deficits, plus low foreign exchange reserves, make it vulnerable to another devaluation in the dong, which is pegged to the US dollar.

The central bank devalued the currency on Aug. 17 for the third time since November, cutting the reference rate by 2 percent in what it said was a bid to control the trade deficit.

Speculation of another devaluation has been putting pressure on the currency, making businesses reluctant to sell dollars.

State Bank of Vietnam Governor Nguyen Van Giau was quoted on Tuesday as saying the central bank had no plans to adjust the rate even though the dong has been dropping on the unofficial market, according to a state-run newspaper.

Inflation would be at around 7 percent in 2011, the government report said. The government is aiming for 8 percent this year.

With imports in 2010 seen climbing 16.5 percent, the trade deficit would stay below 20 percent of the country's export revenue, it said.

The government targets for 2011 need approval by parliament, which had approved a target for exports to grow 6 percent this year.

Dung said he expected foreign debt this year to rise to 42.2 percent of gross domestic product from 30 percent last year. Government debt would be 44.5 percent of GDP while public debt would hit 56.7 percent of GDP, he said in the report.

Vietnam's credit growth is expected to be 25 percent this year and money supply would grow 20 percent from 2009, fuelling economic growth of 6.7 percent for the whole year, Dung said.

He estimated the bad debt ratio for the whole of 2010 would be kept below 3 percent of loans, against 2.03 percent at the end of 2009.

The annual trade deficit for 2011 would be kept at less than 20 percent of exports, while the budget deficit would be 5.5 percent of GDP, Dung said in televised remarks.

Vietnam's investment for development is projected to be equivalent to 40 percent of GDP in 2011, slightly lower than this year when investment would jump 12.9 percent from last year and make up 41 percent of GDP.

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Banks turn cautious about rate cuts

HANOI - Banks in Vietnam have received another call to lower interest rates, but neither the lenders nor the central bank are expecting any cuts to be large, said economists.

The Vietnam Banks Association, which acts as a mediator between the State Bank of Vietnam and lenders, called on banks last Wednesday for the third time in the past six months to cut dong deposit rates, this time to 11 percent from 11.2 percent by Oct. 15.

The association referred to amendments the central bank made to a new set of banking safety rules last Tuesday, suggesting that they would make it easier in future to raise deposits.

But the industry association had previously urged banks to slash deposit rates to 10 percent and lending rates to 12 percent by the end of September, and the new target of 11 percent appeared to reflect an understanding that macroeconomic developments were making it hard to bring rates down by much.

The association's request came as the Ministry of Planning and Investment said economic growth would reach 6.7 percent this year, exceeding the official target of 6.5 percent.

September annual inflation hit 8.92 percent, quickening for the first time in half a year.

"With current market movements, the recent decrease in interest rates is positive, but they cannot drop much more," the newspaper Vietnam Investment Review quoted government adviser Tran Du Lich as saying.

Many lenders considered the central bank's original set of safety rules too stringent. Lich said the amendments may not have a direct impact on rates, but they aimed to give banks with low liquidity more time to prepare for new requirements.

The central bank was also urging lenders to cut rates to help spur economic growth, but its enthusiasm appeared curbed by the 1.31 percent surge in consumer prices in September.

"Monetary policy needs to guarantee the two targets of boosting economic growth and containing inflation are met. It is necessary to cut interest rates, but it requires time and gradual steps", Nguyen Dong Tien, deputy governor of the State Bank of Vietnam, said last week.

But Le Dang Doanh, an independent economist, warned that a minor cut in rates would not be enough.

"Vietnam's economic growth this year has been fueled by public investment and an increase in exports. If interest rates remain high, businesses, especially those in the private sector, will feel the heat early next year," he said.

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ADB ups growth forecast for Vietnam

The Asian Development Bank (ADB) has upped its economic growth forecast for Vietnam this year to 6.7 percent from the 6.5 percent it projected in April.

It has also raised the growth forecast for 2011 to 7 percent from 6.8 percent previously, while lowering inflation projection to 8.5 percent this year and 7.5 percent next year, according to the Asian Development Outlook 2010 Update released by the bank on Tuesday.

“The shift from strong fiscal and monetary stimulus implemented during the global recession to a more balanced policy stance helped to stabilize financial and economic conditions and, together with the global economic recovery, paved the way for solid economic growth this year,” said the report.

Vietnam’s third-quarter growth hit 7.16 percent, well above the government’s target of 6.5 percent for the full year, government data said on Tuesday.

Gross domestic product (GDP) in the country, which aims to become an industrialized nation by 2020, expanded 5.8 percent in the same July-September period last year, the General Statistics Office said.

Vietnam’s nine-month economic growth was 6.52 percent, a “relatively high rise” compared with last year’s 4.62 percent over the same period, the agency said. It said the economy had become “rather stable towards a positive trend.”

Talking to the press on Tuesday, ADB’s Vietnam Country Director Ayumi Konishi said, “Vietnam should continue its efforts to ensure a better understanding of its policy stance by the public at large, supported by greater and timely availability of information and statistics.”

“This applies not only to the government but also to the corporate sector. In order to promote better corporate governance of public and private enterprises, quality and timeliness of information to be made available to the owners or shareholders and potential future investors will be the key,” Konishi added.

Most of the fiscal stimulus measures implemented during the global financial crisis expired at the end of 2009. Reflecting a somewhat more restrained fiscal stance, the government is targeting a 2010 budget deficit equivalent to 6.2 percent of GDP, narrower than the actual deficit in 2009 of 7 percent, said the ADB’s report.

Lei Lei Song, senior economist at the ADB, said on Tuesday that Vietnam’s growth resulted from an improved external environment and government stabilizing measures brought in last year to address macroeconomic imbalances.

Song warned of risks to Vietnam’s economic development as the dong is expected to be further devalued and inflation remains much higher than in other countries. This may erode the confidence of consumers and investors, Song said.

According to ADB, policy tightening and a good rice harvest contributed to the pulling back of inflation to 8.2 percent in July and August, although it increased to 8.9 percent in September.

Sizable trade deficits and relatively high inflation, coupled with residents switching from local-currency assets into US dollars and gold, continued to put downward pressure on the dong exchange rate, the bank said. From last November to August 2010, the dong was devalued three times, by a total of about 11 percent against the US dollar.

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ADB ups growth forecast for Vietnam

The Asian Development Bank (ADB) has upped its economic growth forecast for Vietnam this year to 6.7 percent from the 6.5 percent it projected in April.

It has also raised the growth forecast for 2011 to 7 percent from 6.8 percent previously, while lowering inflation projection to 8.5 percent this year and 7.5 percent next year, according to the Asian Development Outlook 2010 Update released by the bank on Tuesday.

“The shift from strong fiscal and monetary stimulus implemented during the global recession to a more balanced policy stance helped to stabilize financial and economic conditions and, together with the global economic recovery, paved the way for solid economic growth this year,” said the report.

Vietnam’s third-quarter growth hit 7.16 percent, well above the government’s target of 6.5 percent for the full year, government data said on Tuesday.

Gross domestic product (GDP) in the country, which aims to become an industrialized nation by 2020, expanded 5.8 percent in the same July-September period last year, the General Statistics Office said.

Vietnam’s nine-month economic growth was 6.52 percent, a “relatively high rise” compared with last year’s 4.62 percent over the same period, the agency said. It said the economy had become “rather stable towards a positive trend.”

Talking to the press on Tuesday, ADB’s Vietnam Country Director Ayumi Konishi said, “Vietnam should continue its efforts to ensure a better understanding of its policy stance by the public at large, supported by greater and timely availability of information and statistics.”

“This applies not only to the government but also to the corporate sector. In order to promote better corporate governance of public and private enterprises, quality and timeliness of information to be made available to the owners or shareholders and potential future investors will be the key,” Konishi added.

Most of the fiscal stimulus measures implemented during the global financial crisis expired at the end of 2009. Reflecting a somewhat more restrained fiscal stance, the government is targeting a 2010 budget deficit equivalent to 6.2 percent of GDP, narrower than the actual deficit in 2009 of 7 percent, said the ADB’s report.

Lei Lei Song, senior economist at the ADB, said on Tuesday that Vietnam’s growth resulted from an improved external environment and government stabilizing measures brought in last year to address macroeconomic imbalances.

Song warned of risks to Vietnam’s economic development as the dong is expected to be further devalued and inflation remains much higher than in other countries. This may erode the confidence of consumers and investors, Song said.

According to ADB, policy tightening and a good rice harvest contributed to the pulling back of inflation to 8.2 percent in July and August, although it increased to 8.9 percent in September.

Sizable trade deficits and relatively high inflation, coupled with residents switching from local-currency assets into US dollars and gold, continued to put downward pressure on the dong exchange rate, the bank said. From last November to August 2010, the dong was devalued three times, by a total of about 11 percent against the US dollar.

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ADB supports SOE reform in Vietnam

The government and the Asian Development Bank on Monday signed a US$630 million financing facility to help accelerate reforms of state-owned enterprises (SOEs) in the country.

The multi-tranche facility aims to improve the efficiency of SOEs and enhance corporate governance to spur Vietnam’s economic growth, the Manila-based bank said in a statement.

ADB said it will provide $600 million from its ordinary capital resources to strengthen the balance sheets of selected SOEs through debt restructuring.

Another $30 million from the Asian Development Fund will be used to support improvements in their operations and corporate governance, as well as their and related institutions’ institutional capacity.

The Ministry of Finance will be the executing agency for the program, and the facility is to be utilized by December 2015, the bank said.

Under the financing facility, training and other assistance will also be provided to government institutions involved in the SOE reform process.

The transformation of SOEs in Vietnam started in 1992, but ADB said the process “has been slow and confined mainly to smaller enterprises.”

“ADB assistance will support some SOEs to become more efficient, profitable and transparent with better corporate governance,” the bank said in its statement.

“Enhancing corporate governance of SOEs is a key for Vietnam to enhance the efficiency of its economy and to achieve higher economic growth through reducing inefficient state production and promoting private sector development,” said ADB Country Director, Ayumi Konishi.

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A brighter economic future

Goods are exported from HCM City's Cat Lai Port. Viet Nam's economic growth was expected to reach 6.7 per cent in 2010 thanks to Government steps to stablise the economy. — VNA/VNS Photo Kim Phuong

HA NOI — 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. — VNS

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ADB raises VN’s economic forecast to 6.7 pct

The Asian Development Bank (ADB) increased Vietnam ’s economic growth
forecast for 2010 from 6.5 percent to 6.7 percent while lowering the
inflation projection to 8.5 percent.

In its Asian Development Outlook 2010 Update (ADO Update) released in
Hanoi on Sept. 28, ADB also revised upward Vietnam’s GDP growth to 7
percent in 2011 from its April forecast of 6.8 percent.

“ Vietnam has consolidated its macroeconomic stability, and as a
result we are making upward adjustments in our growth forecast for both
2010 and 2011, while lowering the projections for inflation,” said Ayumi
Konishi, ADB Country Director for Vietnam .

According to ADB Senior Expert Lei Lei Song, Vietnam is performing well in the context of the global crisis.

“The shift from strong fiscal and monetary stimulus implemented during
the global recession to a more balanced policy stance helped to
stabilise financial and economic conditions and, together with the
global economic recovery, paved the way for solid economic growth this
year,” he said.

According to the General Statistics
Office, Vietnam ’s GDP growth rate reached 6.5 percent in the first
nine months of 2010.

Vietnam ’s neighbouring
economies, such as China , continue their robust growth next year,
which will help Vietnam ’s economy grow, Song added.

China ’s robust growth will demand more Vietnamese exports,
contributing to the Southeast Asian country’s growth, he said.

Vietnam ’s exports to China will continue to surge in the future, according to the senior expert.

Director
Konishi said as Vietnam is a low-middle-income country in the next
ten years, the country will have to face different challenges, including
how to raise the efficiency of the economy.

One of
the issues Vietnam should focus on in its economic development
strategy for the next 10 years is to identify its role in the ASEAN
bloc, he said, suggesting the country produce higher value products in
its efforts to speed up national industrialisation and modernisation.

He also recommended that Vietnam pay attention to taking measures
to narrow income gap in its development plan and attach environment
protection to development.

According to Yumiko Tamura, ADB
Principle Country Specialist, who is also Country Deputy Country
Director, developing Asia countries, including Vietnam , are
recovering with speed and vigour.

ADB forecast that these countries will see average growths of 8.2 percent in 2010 and 7.3 percent in 2011./.

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Vietnam 2010 GDP to grow 6.7 pct, beating target: gov’t

Vietnam's economy is expected to grow 6.7 percent this year, beating a government growth target of 6.5 percent, the government said.

The economic growth would accelerate to 7.18 percent in the third quarter ending September from a year ago, from an annual growth of 6.4 percent in the second quarter, it said.

"The GDP growth in the third and the fourth quarters of 2010 will be higher than the growth rate in the first and the second quarters as domestic production has gathered growth momentum and global trade is rising rapidly," the government said in a statement issued late on Tuesday.

The National Assembly, the parliament, has initially targeted economic growth this year at 6.5 percent, rising from 6.32 percent in 2009.

The growth forecasts were released at a monthly cabinet meeting ending on Tuesday, at which the government set a growth target of 7.5 percent for 2011, the statement said.

The target for next year needs approval from the National Assembly, which will review next year's projections during a month-long autumn session starting on Oct. 20.

Vietnam's industrial output between January and August rose 13.7 percent from a year ago to 69.51 trillion dong ($3.58 billion), more than doubling the annual expansion in the first eight months of 2009, government statistics show.

The Vietnamese government has projected average annual economic expansion of between 7.5 percent and 8.5 percent over the five years from 2011, local media reported in July.

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