Stability and efficiency will be the engine of Vietnam’s sustainable economic growth, ADB Country Director for Vietnam Ayumi Konishi said at a press briefing in Hanoi on April 13 on the announcement of the Asian Development Outlook 2010 (ADO).
The annual ADB publication that forecasts economic trends in Asia, said policies focusing on macroeconomic stability rather than rapid growth, and efforts to improve the economy’s efficiency are essential for Vietnam 's sustainable development as a middle income country. Substantial and timely policy responses helped Vietnam weather the global recession in 2009, and Vietnam's growth is projected to accelerate in 2010 and 2011. However, the economic stimulus measures also resulted in devaluation and inflation pressures, it said.
The report emphasises the importance of macroeconomic stability, since investor confidence is the key factor for Vietnam to attract large inflow of foreign direct investment and to ensure that the capital account surplus is larger than current account deficit to result in the increased foreign exchange reserve.
As Vietnam will implement the new Socio Economic Development Plan 2011-2015 as a middle income country, focus on efficiency will enable Vietnam to be integrated deeper into the regional and global value chains, it said. “Without enhancing the efficiency of the country's economic systems, attempts to achieve higher economic growth rate will inevitably invite the return of high inflation, and people's concern over inflation will result in the pressure on Vietnamese dong,” Konishi said. He added that inflation will make the poor suffer the most, and the devaluation expectations will discourage the continued in flow of foreign direct investment which has been the engine of Viet Nam’s rapid economic growth.
The report noted that the Government took several steps to improve governance and the business environment in 2009 and welcomed the ongoing efforts under Project 30 to reduce administrative procedures as a policy on right direction to improve efficiency. The report commended Vietnam's macroeconomic management during the global economic crisis and the achievement of 5.3 percent growth in 2009. Based on somewhat tightened fiscal policy with the fiscal deficit target at 8.3 percent of GDP, and the tightened monetary policy with the target credit growth of 25 percent this year, GDP growth is projected to accelerate to 6.5 percent in 2010, and then to 6.8 percent in 2011, with the average inflation of 10 percent and 8 percent in 2010 and 2011./.