Vietnam's economy stimulates new developments

Vietnam's economy is showing positive signs, according to Standard Chartered recent report titled, "Vietnam-what a difference a year makes." In the report released in mid-April, Tai Hui, head of the Southeast Asia research department, said the trade balance in the country steadily swings from a deficit to a surplus. For Q1 09, Vietnam had a trade surplus of $1.6 billion, compared to a deficit of $8.4 billion in the same period last year. Another positive sign was with exports increasing by 25.9 percent in February and 12.9 percent in March after shrinking for three months between November 2008 and January 2009. Inflation remains on a downward trend, dropping to 11.2 percent in March, the lowest since December 2007, after peaking in August 2008 at 28.3 percent. The senior economic expert forecast that inflation could drop to a single digit by the 2H 09 if oil and food prices remain stable. Gov't intervention Official figures show that the country attracted $6 billion of pledged FDI in Q1 09, slightly higher than $5.2 billion recorded in the same period last year. Hui attributed the State Bank of Vietnam's (SBV) prompt monetary policy for the U-turn in the economy 12 months ago. Trade deficits reached up to 9 percent of GDP in the Q1 08 and inflation culminated at 28.3 percent in August of the same year. The government was quick to reverse its monetary tightening, reducing the base rate to 7 percent in early April 2009 from 14 percent in September 2008. Meanwhile, the authorities also allowed the Vietnam dong (VND) to fall further against the dollar. Since the end of September 2008, the VND has dropped by 7 percent. Stimulus plans The government has announced various fiscal measures to back economic growth, including interest subsidies and tax deferrals. In the report, Standard Chartered remained constructive in its medium-term outlook for Vietnam while 2009 is still a year of great challenges for the domestic and regional economy. The bank experts forecast that Vietnam's purchasing power will double in the next six to seven years, after the growth of other Asian economies. Resilience despite the odds Vietnam, because of its stable political environment and low production costs, is often regarded by Asian ventures as a good option, the report said. "The experiences of other Asian economies often serve as an example to Vietnamese policy makers as they identify the most appropriate approach to facilitate growth. The domestic market turmoil in Q2 08 and Q3 08, as well as the global financial crisis, shows that the authorities are fast to learn and adopt in our view," the report clarified. Standard Chartered retained its former forecasts of the Vietnamese economy growth at 4.2 percent in 2009 and 5 percent in 2010. Source: Vietnam Business FinanceZoom Kobe Venomenon VI 6