Economists are optimistic with Vietnam’s economic growth even as rising inflation takes a bite out of gains made over the last few years.
Vietnam’s gross domestic product (GDP) growth for the first half of the year hit 6.6-6.7 per cent, according to reports delivered at a recent economic review meeting held by the Ministry of Planning and Investment (MPI).
“If this momentum can be maintained, Vietnam’s targeted 7 per cent in GDP growth across 2008 will be within reach,” said MPI Deputy Minister Cao Viet Sinh. “Inflation and trade deficit have been slowed in the last two months, largely contributing to sustained growth in the first half of the year.”
The MPI reports indicate that Vietnam’s consumer price index (CPI) in June grew 2.2 per cent from May – the lowest month-on-month rate in the first half of the year. Nevertheless, inflation peaked at 18.4 per cent for the first half of this year, against the only 5.2 per cent for the same period last year. Major price hikes occurred in food, foodstuffs, consumer goods and construction materials.
“In the spirit to curb inflation, any price hike for electricity, coal, fertiliser, construction materials will not be considered until the end of the year,” said Sinh. The announcement came in response to local steel and cement producers asking for governmental permission to raise their prices in a bid to help them stay afloat.
An official of the Vietnam Steel Corporation said that the price of imported billets, the raw material used to produce wire rods and bars, increased 56 per cent from the beginning of the year to around $1,200 per
tonne. Local finished steel products were priced between $860 and $900 per tonne.
Similarly, cement makers said they are losing at least $10 on every tonne of cement they are now selling in the domestic market. Sinh criticised heavy reliance on foreign raw materials imports like steel and cement as contributing factors to the nation’s soaring trade deficit. Vietnam’s trade deficit reached $14.7 billion for the first half of the year, compared to $12.4 billion for 2007.
“We need to limit the trade deficit by $1 billion per month for the rest of the year, then allowing the figure to not climb over $20 billion for the whole year,” Sinh said. He said that the MPI was also looking at boosting foreign direct investment (FDI) disbursement until the end of the year.
In the first half of this year, Vietnam’s newly registered and expanded FDI capital was $31.6 billion against $21.3 billion across 2007, with only $5 billion so far disbursed.