The World Bank in Vietnam has predicted that the country’s economic growth rate would decrease to 6.5 percent during the 2008-09 period, down from 8 percent in 2007.
This forecast, announced during a press briefing on Dec. 10, was based on the trend of a deceleration of development across the East Asia region. According to the WB’s East Asia and Pacific Updates, East Asia ’s short-term growth will slow to 8 percent, compared with 9 percent in 2007.
According to WB’s Country Acting General Director Martin Rama, Vietnam , along with other regional countries, including developing and industrial nations, will be affected by the global financial crisis, particularly in the financial and banking sectors.
However, Vietnam has carried out structural reforms prior to the crisis, thus it is better prepared to cope with the issue, he said.
The WB chief representative also said the country’s projected 6.5 percent growth rate was based on the bank’s appreciations of Vietnam’s two major strengths-exports and the flow of foreign direct investment (FDI) capital.
Vietnam’s exports during 2008 have been a bright light against the gloomy background of the global economy. Over the past 11 months, export turnover has posted a phenomenal increase of 34 percent. Excluding crude oil, export earnings increased by 35 percent.
According to the WB, Vietnam enjoyed a year-on-year increase of 19 percent in textile and garment exports during the past 11 months, despite a decline in global demand.
Despite being affected by the European Union’s anti-dumping decision, the country’s exports of footwear experienced a rise of 18 percent. Exports to the EU and US markets also increased by 16 percent and 14 percent, respectively.
Vietnam has strengthened its export capacity, Rama said, meaning that the country’s export value in the 2008-2009 period may decrease due to the economic downturn, but the decrease may not be so serious as to lead to a recession.
Rama predicted that the flow of FDI into Vietnam would slow to a trickle, however, so far it has gushed to meet the country’s demand for production. The total FDI capital registered during the first 10 months of 2008 hit a record of 59.3 billion USD, representing two thirds of the nation’s GDP.
Vietnam ’s development in 2008 proved its capability for rapid economic recovery, partly thanks to the government’s package of solutions to stabilise economy released in late March, the WB said.
However, the WB also issued a warning that the tightened monetary policy to cope with inflation has put pressure on the country’s banking sector and created difficulties for the business communities’ access to loans. Although the pressure has eased, banks’ properties may depreciate in 2009.
The WB also lauded a package of solutions prepared by the Vietnamese Government to stimulate the economy, and buck the declining trend seen in the global economy.
These solutions will focus on stimulating production and exports, facilitating consumption and investment, loosening financial and monetary policies, reducing poverty and providing social welfare, and strengthening the State’s management capacity across all levels.
The WB report went on to say that, among East Asian countries, Mongolia which is considered a closed economy and thus less affected by external forces, has projected growth rates of 10 percent for 2008 and 7.5 percent for 2009, the largest predicted figures for the region. It is followed by China, Laos, Cambodia and Indonesia. Thailand and the Philippines are forecast to see growth rates of less than 4.6 percent during the next two years./.