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Vietnam Economy Highlights

[General] Vietnam’s Consumer Price Index (CPI) in December rose by 1.38 percent from last month and by 6.52 percent over the same period last year, according to the General Statistics Office (GSO). The statistical agency says the CPI for the whole year went up by only 6.88 percent against last year, which means the country has successfully kept the inflation rate at bay (under 7 percent). The December CPI rise was reflected in 10 out of 11 major groups of commodities, with increases ranging between 0.07-2.06 percent. Only the post and telecommunications sector continued contracting, nudging downwards by 0.11 percent. Most prominent was the transport industry whose CPI climbed 2.47 percent. Next came food and restaurant services with 0.06 percent and housing and construction materials at 1.4 percent. Goods and services in the cultural, recreational and tourism sector saw the lowest increase.
Economic experts attribute these changes to an increase in petrol prices in late November while the demand for travel has soared towards the end of the year.Also, food prices have approached their new record highs in December as domestic businesses are boosting the purchase of rice to fulfil a large number of export contracts secured this year.
Such products as steel and cement have also contributed to December’s high CPI. Other factors include the import of a large volume of luxury items such as wine and spirits at year’s end, even as the price of the dollar over domestic currency is rising. Many economists predict a number of other essential goods would see surges as the Lunar New Year (Tet) festival) is drawing near. They also warn that some businesses might make use of fluctuations in exchange rates and the state’s policy to limit luxury imports in order to raise the prices of these commodities for their own profit. Therefore, the state’s efforts to reserve goods and supervise and control the market are extremely necessary to prevent speculation on goods and possible virtual fevers on the market during both the New Year and Tet. Also in December, gold prices increased by 10.49 percent against November and by 64.32 percent compared with the same period last year.- Source: Vietnam Economic News, 25/12/2009,6

[Finance] Prime Minister Nguyen Tan Dung has ordered seven major State-owned enterprises and economic groups to immediately sell US dollars from their deposit accounts to commercial banks authorised to handle foreign exchange.
The directive was aimed to boost the capacity of the State Bank of Viet Nam to manage foreign exchange as well as to ease the shortage of dollars in the economy. Oil and gas giant PetroVietnam, mining giant Vinacomin, the Viet Nam Machine Assembly Corporation (Lilama), Viet Nam National Chemical Corporation (Vinachem), Vietnam Airlines, and major food processors Viet Nam Northern Food Corporation and Viet Nam Southern Food Corporation were all told to release their dollar reserves.- Source: Vietnam news, 25/12/2009,1

[Economy] Vietnam’s inflation accelerated to the highest level since May, driven by faster-than-targeted credit expansion, quicker economic growth and higher oil prices. Consumer prices increased 4.35 percent in November from a year earlier after gaining 2.99 percent in October, according to figures from the General Statistics Office in Hanoi. On a monthly basis, prices rose 0.55 percent in November from October. Inflation may accelerate to 6 percent by the end of the year, Deputy Prime Minister Nguyen Sinh Hung said last week. Credit growth in the 10 months through October reached 33 percent, exceeding the government’s 30 percent full-year target.

Higher commodity prices and “healthy” wage growth, according to Capital Economics Ltd., are also driving inflation.

“There are risks of inflation picking up,” Hung said in a Nov. 18 interview in Hanoi. “Since we wanted to boost economic growth, we injected a large volume of funds to businesses.” The government also expects inflation of about 6 percent in 2010, Hung said, calling it an “acceptable and reasonable” increase given Vietnam’s economic growth. - Source: Vietnam Cap.News, 25/11/2009,3

[General] The US-based premier service firm PricewaterhouseCoopers LLP (PwC) predicts that Hanoi and Ho Chi Minh City will rank first and second in the list of the world’s 30 cities with the highest growth rates from 2008 to 2025. The two cities’ annual GDP will grow at an average seven percent rate during this period. Hanoi and Ho Chi Minh City are followed by the Chinese cities of Changchun (3rd) and Guangzhou (4th) in the list, which includes 12 from India, seven others from China and none from developed countries. This clearly indicates that the global balance is tilting toward emerging economies
PwC’s research results from 151 cities in the world show that the GDP of the 100 largest cities made up 30 percent of the global total in 2008.
Hanoi and Ho Chi Minh cities are predicted to be among the most prominent ‘climbers’ in the world list of the 100 most developed cities for 2025. Specifically, HCM City will jump from 95th place in 2008 to 64th place in 2025 while Hanoi will climb from 116th position in 2008 to 82nd position in 2025 - Source: Vietnam Investment News, 12/11/2009,7

[Economy] The World Bank on November 4 became the latest major institution to raise its forecast for growth in Vietnam.The Washington-based World Bank said in its latest “East Asia and Pacific Update” which is published twice a year that Vietnam economy navigated the crisis relatively well and raise forecast for its GDP growth.
“The global financial crisis and economic recession slowed economic growth in Vietnam”, the report said citing the downtrend in Vietnam’s exports and manufacturing in 2008 and especially GDP growth rate. Over the first eight months of 2009, exports declined by 14.2% and imports fell 28.2% on year in dollar terms resulting in the current account deficit of about 5% of the GDP in 2009, down from 11.9% in 2008, the report said.
Foreign exchange reserves declined to about US$16.5 billion by August 2009 from US$23 billion at the end of 2008. The fiscal deficit is expected to widen to 9.4% of GDP in 2009, reflecting a decline in revenues and a significant increase in expenditures, the report said.

The most apparent effect is seen in a GDP growth of 3.1% in the first quarter of 2009, 4% than average Q1 of last few years, the report said. “However, positive signs of recovery have been emerging as a result of the government efforts to support economic activity”, the World Bank said, citing Vietnam government stimulus package which included various measures, from an interest rate subsidy, to tax breaks, and to additional capital spending. Monetary policy has been loosened substantially to support domestic demand after a period of tightening in 2008 to tackle overheating. The central bank cut its policy rate by half to 7% from mid-2008 to February 2009. The policy rate cut, together with the interest rate subsidy, has led to accelerated bank credit growth. As a result, GDP grew by 4.5% in the second quarter and 5.8% in the third, raising real GDP growth to 4.6% year-on-year for January-September.
While manufacturing sector is still facing tough challenges because of falling demand, the construction sector is a leading factor of the recovery, with value-added in the sector projected to reach a double-digit growth rate for the whole year. Domestic consumption is also an important factor of the recovery process, with retail sales increasing 9.3% in real terms during January-August from a year earlier.
Poverty levels continued to fall in Vietnam with considerable recent progress in rural development it said.

The World Bank forecasts a growth rate of 5.5% for 2009 as a whole, or more than 2 percentage points below the trend, believing that Vietnam’s economy navigated the crisis relatively well.- Source: Vietnam Business Forum, WB, 06/11/2009,4

[Industry] The country’s industrial sector has achieved total revenue of US$3.5 billion over a four-week period beginning in late August, according to the Ministry of Planning and Investment. Revenue in the last nine months has increased 6.5 per cent over the same period last year, totalling VND505.9 trillion ($28.4 billion), most of it from crude oil and coal.The year-end target, however, is still short by 16.5 per cent, according to the ministry.

Mining and production are among the industries that have gained average growth.The processing industry grew slowly although the rate was higher than previous months. Crude oil prices were higher than earlier this year, $60 to $70 per barrel, which have contributed to the rise in export turnover for the period.

Import turnover reached $48.2 billion, a fall of 25.3 per cent compared with the same period last year. However, the trade deficit in the last nine months has edged up to $6.5 billion, occupying 15.7 per cent of export turnover. Imports of iron and steel, cotton, fertilisers and plastic materials has shown signs of recovery in several industrial sectors, according to experts. The ministry expects industrial revenue for the entire year to reach VND693.795 trillion ($38.9 million), thanks to the governmental stimulus packages and the slow recovery of the world economy, marking a year-on-year rise of 7.2 per cent over the last year.- Source: Vietnam Capitals, 05/10/2009,5

[FDI] Vietnam has acquired 583 newly-licensed projects with total registered capital of US$7.67 billion so far this year, according to the Ministry of Planning and Investment’s Foreign Investment Department. The number is only 14.3 percent of the same period last year, however, it is still considered a high level in the current global economic downturn. In the first nine months of 2009, Vietnam had 168 FDI projects register to increase their investment capital by US$4.86 billion, up 7 percent year-on-year.

The business and service industry lured the largest volume of FDI, followed by the processing and manufacturing sector. With 24 newly-licensed projects and 11 projects with increased capital, the US topped the list of 38 countries and territories investing in Vietnam this year. During the reviewed period, the country·s FDI disbursement was estimated at US$7.2 billion, equal to 88.9 percent against the same period last year. - Source: Vietnam Net, 04/10/2009,2

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