Economic development of Vietnam in recent years has been very positive, and prospect in the near future is generally favourable, assessed the International Monetary Fund (IMF) when addressing the socio-economic development plan of Vietnam in the period of 2001–2010.
“The aforementioned assessment is based on assessment of Vietnam’s recent macroeconomic situation and economic prospects of Vietnam and challenges on polices requiring Vietnam to settled in order to maintain growth and reduce poverty in the medium term,” said Shogo Ishii from the IMF’s Asia Pacific Department.
According to IMF, the GDP growth of Vietnam in the first quarter slowed down but regained a quick recovery in following months. That inflation increased nearly hitting a double digit is mainly attributed to the skyrocket rise in food prices. Nevertheless, inflation after July reduced. Although a sharp increase in import demand pushed up the deficit of the current account balance, Vietnam registered a remarkable growth in foreign currency reserve. By the end of 2003, foreign currency reserve of Vietnam booked at US$5.6 billion and it is projected that the reserve will book at a moderate figure this year.
Nevertheless, the recent rampant credit growth has become the main cause for the concern over quality of loans and greatly impacted the monetary balance sheet of banks. “The credit growth of from 28% by late 2003 to 36% in July is resulted from increase in credits to state owned enterprises,” added Shogo Ishii, the IMF ‘s division chief for the Asia Pacific Department.
As assessed by the IMF, the GDP growth this year is likely to attain at 7.5% and inflation is anticipated at 9.5%. It is projected that the deficit in the current account balance is 4.5% of the GDP.
The IMF’s projection for Vietnam’s economic prospect is that the GDP growth will still obtain the figure this year, however inflation is anticipated to drop to 5-6%. The import growth may fall upon impacts of removal of apparel quotas for the World Trade Organisation ‘s (WTO) member countries. That means Vietnam will have to face up tougher competition.
Nevertheless, whether such IMF’s projections become realistic depend whether the government can curb impacts of inflation of price shocks from supply side. “The State Bank of Vietnam (SBV) should further tighten monetary conditions if the monetary policy and administrative measures as well as fiscal measures so far seem to be not effective enough,” warned Ishii.
Deputy minister Vu Khoan agreed with the IMF’s assessment that the Vietnam’s economic prospect in 2005 is favourable if the government can curb inflation. “We will pay more attentions to inflation and draw experiences from settlement over price matters this year so that such high inflation will not repeat in 2005,” said Vu Khoan.
Poverty reduction will still be the first priority of Vietnam next year as well as for the whole phase of 2006-2010. This year close with the poverty reduction rate to nearly 9%, the further reduction in 2005 will be completely feasible.