Economy may rebound but lag China - ANZ

Economy may rebound but lag China - ANZ

The Vietnamese economy has a greater chance of rebounding than other economies but it may not recover as fast as China, according to a report by Australian bank ANZ.

In its “Can Vietnam Replicate China’s Recovery” report, released on September 7, ANZ noted China’s economy expanded by 15 percent in the second quarter of 2009.

In the fourth quarter of last year, China’s gross domestic product (GDP) stalled at zero percent growth. But ANZ said China’s command-style economy, which allows the government to order an increase in lending and production, had helped the nation implement an effective stimulus plans

The ANZ report said Vietnam’s economic structure closely resembled China’s, indicating the country may enjoy a similar rebound.

“All told, Vietnam should be able to outperform some of emerging Asia given its command structure, but not recover at the pace we have seen in China,” the report said.

However, the bank said there could be a number of impediments to Vietnam’s recovery.

Vietnam has a weaker balance of payments than China and must rely on foreign financing, which has been subdued, the report said.

In January this year, the country announced an economic stimulus plan, worth an estimated US$6 billion or 6.8 percent of GDP.

But GDP growth in the first quarter still fell to 3.1 percent year-on-year as exports and industrial production slowed.

Economic growth rebounded to 4.5 percent year-on-year in the second quarter as the stimulus plan began having an effect, according to the report. Meanwhile, inflation fell from a peak of 27.9 percent in September 2008 to 2 percent, year-on-year, in August.

Also, like other Asian countries, Vietnam’s exports have decline sharply since late last year.

The country’s earning from exports last month fell 18.9 percent year-on-year while import growth turn positive for the first time in 10 months, rising 5 percent.

ANZ also pointed out a sizeable monthly trade deficit had re-emerged. Vietnam’s trade deficit last month was $1.75 billion, the highest since May 2008.

As the trade balance deteriorated, external financing has also ebbed. Pledges for foreign direct investment in Vietnam so far this year has fallen by more 80 percent to $10.1 billion.

The report also noted that Vietnam’s policy-making process was less developed and predictable than China’s, which may affect investor confidence as well as the efficiency of the stimulus plan.

Hong Nguyen

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