ADB shoots down nation’s GDP target

The bank made the forecasts in its annual Asian Development Outlook publication, predicting GDP growth would reach 7.6 per cent during 2005 and 2006, falling to 7.5 per cent in 2007.
The figures are far lower than the Vietnamese government’s target of 8.5 per cent this year.
Ramesh Adhikari, head of ADB country programmes and economics, said the reason behind the discrepancies was the government was more ambitious and optimistic than the ADB.
He said to achieve such a high GDP growth rate, Vietnam would have to raise its percentage of GDP on investment to 38 per cent and heat up the economy as it moves closer to 40 per cent of GDP – a figure many believe represents an overheated economic environment.
According to the ADB, export growth will reach a record figure of 11.4 per cent in 2005 and fall to 8.9 per cent in 2006 and 8.6 per cent in 2007.
The bank said the export environment looks favourable following the high crude oil prices seen recently and Vietnam’s closer integration into the world economy.
Meanwhile, possible risks to the country’s economy involve more external competition for domestic enterprises and the issue of market access if Vietnam’s World Trade Organisation (WTO) accession bid fails or is delayed.
Garment markets are more competitive since the Multi-Fibre Arrangement (MFA) ended, but the country needs to join the WTO to secure the favourable treatment accorded to members of the world’s largest trading organisation.
“If you look at the growth and where the growth comes from, it is really hard to achieve 8.5 per cent GDP growth this year, particularly due to export constraints,” said Adhikari.
Domestic demand increased by 8 per cent this year, the lowest level in three years. The highest level of domestic demand is expected to occur in 2006, when forecasts predict an 8.7 per cent increase.
Inflation is forecast to fall from 7.7 per cent last year to 5.7 per cent in 2005 and 5.2 per cent during 2006-07.
The bank also said the government is calling for total investment of about $19 billion, of which 70 per cent will go into infrastructure construction such as roads, bridges and power plants.
Gross international reserves, including gold, are estimated at $6 billion, the same as last year, equivalent to about 2.5 months of imports.
Last year, Vietnam’s GDP grew by 7.4 per cent, helped by a strong global market for oil and commodities.
Buoyant exports narrowed the trade deficit to 11.5 per cent of GDP in 2004 from 12.6 per cent in 2003.
The annual inflation rate increased by 4.5 per cent over the previous year due to food price rises. Excluding food, the rise in CPI was only 3 per cent.