April 3 – Vietnam’s gross domestic product will grow for the third straight year at eight percent this year according to a recent World Bank report.
In the report, “East Asia: Testing Times Ahead,” the World Bank described Vietnam as a “growth pole in the world economy, providing a possible counterweight to the slowing industrial economies.”
The report predicted a growth of 7.3 percent for East Asia overall, excluding Japan which is expected to turn in a sluggish one percent.
The World Bank forecast a 22 percent growth in Vietnam’s real export, and an 11 percent growth for fixed investment in industrial assets despite a U.S. recession that is slowing exports.
Martin Rama, the World Bank’s chief economist in Vietnam, warned against the consequences of overheating such sustained growth could bring to Vietnam, especially inflation. While rising food and fuel prices tied to increasing monetary and credit growth have pushed inflation rates up in almost every East Asian country, Vietnam experienced an alarming surge from 6.6 percent to almost 16 percent, from the end of 2006 to February of 2008.
Rama sees increased credit and economic openness as a major challenge that, while helping to turn Vietnam into an economic powerhouse, could pose dire consequences to the country’s many poor, as the prices of basic goods surge out of affordable ranges. He recommends tighter credit for sub-prime investments in the public sector, while admitting this could hurt export growth.
While the Vietnam government already has a package plan to cool down the economy, the World Bank cautioned that effective implementation of the plan was still at issue.
