VIETNAM - Growth in Vietnam slowed to 6.5% in the first six months of 2008 from a year earlier, down from 7.9 percent for the same period last year. The figure is the weakest since 2001. Vietnam’s government has already cut its 2008 growth target to 7 percent, and may have to cut it again.
Growth has been affected by the bursting of two bubbles: the stock market and the property market. Ho Chi Minh City’s stock exchange index has tumbled 56 percent this year, Prices have also come off in property, with residential property prices in Ho Chi Minh City declining as much as 25 percent between December 2007 and May of this year.
High inflation and a credit crunch are also thought to be causing builders to curtail some property projects. Vietnam’s government is targeting a reduction in credit growth this year to 30 percent, as compared to 54 percent in 2007. Tightening credit is needed to fight an inflation rate that reached 26.8 percent in June.
Lower growth is part of the price being paid in the government’s effort to combat the highest inflation seen in Vietnam since doi moi. The first signs are emerging that the medicine may be succeeding. Earlier this week, the country reported the lowest month-on-month inflation hike since the beginning of this year, standing at 2.14 percent in June.
However, the overall picture still shows the impact from the surge in prices in the first half of the year. The inflation rate increased 20.34 percent in the first half of 2008 over the same period last year. Food prices are up 59.44 percent while housing and construction materials are up 14.34 percent.
Aside from the slowing of inflation growth, the government has also worked to address its trade gap by promoting exports. The country shipped goods worth $29.7 billion in the first half of this year, a 31.8 percent surge over last year. But the country’s trade deficit still stands at $14.8 billion in the first six months of 2008, some 184.6 percent over the same period in 2007.
Source: Thanhnien News 3 Jul 2008, Economic growth weakens to 6.5 percent