Vietnam's economic growth will slow down until 2009-end, Citigroup predicts
28-AUG-2008 Intellasia | Vietnamnet
Aug 28, 2008 - 7:00:00 AM
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US based Citigroup on August 19 released the latest report on Vietnamese macro-economy, saying that Vietnam's export and economic growth will slow down until the end of 2009. However, the banking group also pointed out some positive points of Vietnamese economy as follows:
Firstly, Vietnam's trade deficit was down with a sharp fall in imports especially after sudden changes in fuel prices last month. Export activities have been kept at 46% growth rate in August. Yet, according to the group, a strong rise in Vietnam's export turnover this month is thanks to the highly increasing goods prices.
Secondly, the dong and greenback forex rate was fairly stable within the official trading amplitude. Thirdly, the FDI flow into the country still is soaring sharply.
Yet, Citigroup also gave the warnings on alarming points, particularly weakness risks of export, inefficient investment will continue leading to inflation and slowdown in economic growth.
Vietnam's sales to tough markets of Japan and Europe are declining and have risks to be prolonged until next year. Thus, there will appear a high pressure on exports of Vietnam made apparel and electronics.
Additionally, to date the dong has just depreciated by 2% against the US dollar while the CPI surged 20% and domestic inflation resulted in the increase in costs, All of these have made Vietnam's competitive strength in exports weaken in counter with other Asian economies especially exports to European market.
Last month, total registered FDI capital reached US$44.5 billion. Since the year early, a half of FDI was mobilised for industrial production with expectation to turn out 20% of total industrial output. This is an impressively recorded. With such a growth speed, FDI inflow to Vietnam will likely exceed the record of 1995, Citigroup forecasted.
Given explanation of FDI increase in the context of inflation and economic depression, Citigroup said, foreign investors have not yet lost faith in the development prospect of Vietnam. But factually, the more importance is that the majority of FDI projects were signed for long time earlier the galloping inflation. Up to now, Vietnamese economy has just undergone nine months of over 10% inflation and four months of inflation higher 20%. Inflation affects strongly to the life of workers—who usually much money on minimum living cost. High pressure caused by the increasing inflation has raised many strikes because of living quality. However, most of employers now still maintain the salary increase ratio lower than inflation ratio.
Citigroup's specialists gave their point of view that low wage is an advantage of Vietnam and despite inflation, FDI still could easily grow by 60% within this year. Yet, it is right time to acquire the investment efficiency. Ineffective FDI projects invested into Vietnam since 2006 could cause higher burden on inflation.
As forecasted by the group, the global economic growth in next year will decline when Europe, Japan and other newly emerging economies will slump. As a result, Vietnam's export will also be down and the economic growth will slow down as well.
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