Bangkok (UN Information Services) – Viet Nam’s economy is forecast to maintain strong growth into 2008 at 8.2 per cent, having been underpinned by high investment growth with expansion in the industrial and services sectors, according to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
In its Economic and Social Survey of Asia and the Pacific, ESCAP said the growth outlook was near the 8.4 per cent expansion in 2007 which was fuelled by an 11 per cent growth in investment spending and despite slower growth in private consumption.
“An improved investment climate and infrastructure spending were reflected in higher domestic investments,” ESCAP said. In 2007, domestic investment reached 37 per cent of gross domestic product (GDP). Meanwhile industry reported a growth rate of 10.6 per cent while services expanded by 8.7 per cent.
Inflation a key concern going into 2008
But ESCAP said a relatively high inflation rate, forecast at 7.7 per cent in 2008 from 7.9 per cent last year, a widening trade deficit and a high current account deficit were downside elements in the outlook. The inflation rate was expected to remain a key concern for Vietnam in the year ahead.
Authorities have sought to address the inflationary pressures with a tighter monetary policy. Also, a “considerable increase – almost 70 per cent – in foreign capital flows to Viet Nam during the year was a challenge for monetary authority’s efforts to contain inflation, which continued to hover over and above the targeted rate,” ESCAP said.
ESCAP also noted that Viet Nam’s tight control over its currency, which depreciated against the US dollar to around 16,000 dong, as well as large foreign capital inflows “complicated” Viet Nam’s successful efforts to prevent the dong from appreciating.
Viet Nam also saw an increase in foreign exchange reserves reaching an equivalent level of 20 weeks of imports at the end of 2007 from 13.6 weeks in 2006.
Agriculture’s role in reducing poverty, increasing opportunities
ESCAP, in a wider view of the Asia Pacific region, said efforts to reduce poverty in the region required the promotion of productivity in the agriculture sector.
“Agriculture appears to be neglected, even though it still provides jobs for 60 per cent of the working population and shelters the majority of the region’s poor people,” it said in its Survey.
The Survey goes on to note that growth and productivity in the sector have slowed and the green revolution appears to have by-passed million.
ESCAP said that by raising the average agricultural productivity across the region some 218 million, a third of the region’s poor, could be taken out of poverty. India, China, Bangladesh and Indonesia would gain the most.
It also noted that “large gains in poverty are also possible through comprehensive liberalization of global agricultural trade, which could lift a further 48-51 million people out of poverty in the region.”
The policy focus needs to be on revitalizing agriculture. This, ESCAP said, requires connecting the poor to markets through improvements to rural infrastructure, the availability and management of water, agricultural technology, increasing the capacity to adapt technologies, and speeding up diversification and commercialization.
ESCAP says agriculture in Viet Nam has made “important contributions” to poverty reduction, with the sector still accounting for 55 per cent of employment in 2006. But while agricultural productivity has increased over the year “there is still room for an increase in agricultural productivity and thereby reducing poverty at a faster rate.”
“Slow technology adaptation, slow progress in agricultural product processing industries, natural disasters and unfavourable international prices of agricultural products are some of the constraints for the sector’s growth,” ESCAP said.
Further information on the Survey can be found at:
For more information, please contact:
Hak-Fan Lau, UN Information Services, ESCAP
Tel.: +66-2-288-1866, Mob.: +66-84700-1147
Ari Gaitanis, UN Information Services, ESCAP
Tel.: +66-2-288-1862, Fax: +66-2-288-1052