Growth rate to be blunted to match reality

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The Ministry of Planning and Investment (MPI) has officially revised down its growth forecast, from 6-6.5 per cent set early this year to 5.3-5.6 per cent.

“This data is based on the country’s socio-economic situation in this year’s first nine months and forecast for the year’s remaining months. After being studied carefully, it will be submitted to the government and the National Assembly [for approval],” said MPI Deputy Minister Cao Viet Sinh.

The MPI made the revision  amid Vietnam’s ever-growing economic difficulties and economic experts’ wide belief that the 6-6.5 per cent target was unfeasible.

“The growth rate of the industrial and construction sector is predicted to be 5.3-5.7 per cent, while that of the agro-forestry-aquatic and service sectors is expected to be 2.55-2.59 and 6.4-6.6 per cent, respectively against 2011,” said the  MPI’s latest report on 2012’s socio-economic situation.

Bui Ha, head of the ministry’s Department for National Economic Issues, said the index for industrial development (IIP) of 2012 was projected to rise 5.4 per cent on-year. “The IPP for the mining and processing industries is expected to rise 2.2 and 5.4 per cent, respectively, while that of production and distribution of electricity, gas and water being up 14.2 per cent.”

“But export turnover for this year would likely be $111 billion, up 14.5 per cent on-year and exceeding the target of $100 billion set by the National Assembly. The consumer price index (CPI) was forecast to be 7-8 per cent,” Ha said.

Prime Minister Nguyen Tan Dung last week said the country must strive to achieve a gross domestic product (GDP) growth rate of 5.2 per cent this year and an inflation rate of 7 per cent.
Deputy Prime Minister Vu Van Ninh and MPI Minister Bui Quang Vinh both said that the GDP target of 6-6.5 per cent this year would be “out of reach.”

HSBC in its Vietnam Manufacturing Purchasing Managers  Index™ 2012 released last week forecast that business conditions in Vietnam remained challenging and external demand continued to be weak, dragging down export orders.

“With low demand domestically, especially as many Vietnamese try to unload its debt, the GDP growth rate will slow to 5.1 per cent this year, against 5.89 per cent last year,” said Trinh Nguyen, an HSBC economist.

Vo Tri Thanh, deputy head of the MPI’s Central Institute for Economic Management, also projected a similar slowdown for Vietnam, saying the economy could get worse in this year’s remaining months due to very high bad debt ratios and banks unwilling to boost lending, and that credit could not grow 8 per cent on-year this year.

“Thus, GDP is expected to grow 5.1-5.2 per cent this year,” Thanh said. In the Asian Development Bank’s Asian Development Outlook report released in May, 2012, Vietnam’s growth is projected to slow to 5.7 per cent for 2012 before picking up to 6.2 per cent in 2013.