News and Events

“Stay the Course in Storms”

HA NOI, VIETNAM (2 April 2008) – Viet Nam has a good prospect of maintaining or accelerating growth over medium to long term supported by favorable key economic fundamentals. Yet, in order for the country to stay the course, it is essential that Viet Nam effectively deal with two major “storms” in 2008 – very high rate of inflation and the negative impact of global economic slowdown and financial sector turmoil. The Government’s efforts to put inflation under control, as well as the weakening of the external demand are expected make the growth in Viet Nam to moderate to 7% in 2008 while the growth rate can rebound to 8.1% in 2009, the Asian Development Bank (ADB) said in a major report released today.

“It is essential for Viet Nam to maintain macroeconomic stability, and build its resilience to make its economic growth sustainable over the medium to long term” says Ayumi Konishi, ADB Country Director for Viet Nam. “It is important to see the growth rate relative to other neighboring countries, and make the economic policy decisions responsive to the quickly evolving situation to stay the course towards the country’s long term vision.”

The Asian Development Outlook 2008 (ADO), the annual ADB publication that forecasts economic trends in Asia, noted that Viet Nam’s steady transformation to a market-based economy and the deepening of its integration into the global economy made the country one of the most attractive investment destinations in the region with $20.3 billion of Foreign Direct Investment (FDI) commitments in 2007. The dynamism of private sector and FDI helped Viet Nam become one of Asia’s fastest growing economies with GDP growth at 8.5% in 2007 – the first year of WTO accession.

Robust economic growth, supported by strong capital inflow pushed aggregate demand outpacing the aggregate supply, resulted in acceleration of inflation in 2007 and early 2008. “Effective coordination of various policies including monetary tightening, fiscal consolidation and careful pricing policies is essential to bring the inflation down while the Government needs to minimize the distortion and excessive burden on banks and the economy at large,” says Ayumi Konishi. “We, however, need to be patient as inflation will not fall immediately although we appreciate the recent decision of the Government for the necessary policy change. It is expected that inflation will gradually decline toward the end of 2008 and throughout 2009”.

ADB, based in Manila, is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 67 members – 48 from the region. In 2007, it approved $10.1 billion of loans, $673 million of grant projects, and technical assistance amounting to $243 million.

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