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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