The growth of 5.2% in Viet Nam’s gross domestic product (GDP) in the first half of 2014 was a modest increase over the corresponding period of the 2 previous years, but it fell short of expectations. Growth in credit was anemic, and efforts to reform state-owned banks made only slow progress. A maritime territorial dispute with the People’s Republic of China (PRC) in May sparked protests in Viet Nam, some of which damaged foreign-owned factories. Tourist arrivals from the PRC fell, and trade between the two countries was disrupted.
|Selected economic indicators (%) - Viet Nam||2014||2015|
|ADO 2014||Update||ADO 2014||Update|
|Current Account Balance (share of GDP)||4.1||3.5||3.0||2.5|
Source: ADB estimates.
To spur the economy, the central bank lowered interest rates last March, and more recently the government directed financial institutions to step up efforts to meet the target for credit expansion. While these moves are likely to have a positive impact, economic growth forecasts for this year and next are shaved from those in the Asian Development Outlook 2014 in April. Growth is still seen picking up in 2015, assuming better performance in the major industrial economies, some recovery in the domestic property market, and higher household consumption.
Inflation ebbed to 4.7% in the first 8 months of this year, the lowest since 2003. That was a result of lackluster domestic demand, ample food supplies, and relatively steady global fuel prices. Inflation forecasts are lowered from April for both 2014 and 2015.
External accounts showed solid growth in exports and imports in the first half, with further robust gains in shipments of high-tech products such as mobile phones. Large surpluses in the current and capital accounts allowed a rebuilding of international reserves to the equivalent of about 3 months of imports. Substantial current account surpluses are projected for this year and next, though smaller than foreseen in April.
Source: ADB. 2014. Asian Development Outlook 2014 Update. Manila.