VN forecast to grow 6pct annually in next 25 yrs: Ernst & Young
VN forecast to grow 6pct annually in next 25 yrs: Ernst & Young
Vietnam will likely grow by about 6 percent annually over the next 25 years, according to a recent report from Ernst & Young.
However, the report reduced its 2012 growth forecast for Vietnam from 5.3 percent to 4.5 percent.
This is the result of knock-on effects from the financial crisis in the US and Europe with high commodity and energy prices weakening the income of the poor and raising operational costs for businesses, the Financial Times reported, citing the report.
But the fundamentals haven’t changed in emerging markets – domestic demand and infrastructure investment are expected to drive recovery, said the report.
The director of the emerging markets research centre at Ernst & Young, Alexis Karklins-Marchay, told theFinancial Times that “Five years ago, our investors did not care about these economies but they’ve recently changed their attitude. Turkey, Vietnam and Indonesia are good examples.”
In fact, Vietnam has attracted more than $6.5 billion worth of FDI capital per year since 2007.
Karklins-Marchay stressed two factors that help Vietnam attract the attention of investors, including the country’s strategic geographical position and its abundant human resources.
Vietnam has a population of 90 million people, 80 percent of which has graduated from high school, but the labor costs are half of what they are in China and Thailand.
As estimated by Ernst & Young, the number of households with incomes of over $30,000/ year will increase from 6,000 in 2011 to 60,000 in 2021.
This will spur Vietnam to manufacture and export higher-value products. The World Bank forecasts that by 2013, Vietnam’s export turnover from telephones and other related equipment will be higher than that of apparel products.
The Ernst & Young report also focused on capital markets and the banking sector of Vietnam, saying that Vietnam has received strong investment opportunities from Russia, the Middle East and Asian banks.
The report stated that when investor confidence is restored, together with the government’s efforts to strengthen the banking system, the Vietnamese financial market will be able to develop other products and services such as monetary management and a foreign currency risk reserve fund.
However, the report also warned that, apart from potentials, Vietnam is also facing risks from investments.
Matt Hildebrandt, a Singapore-based JPMorgan economist , last week forecast that Vietnam’s economic will slow to 5 percent from now to 2015 as banks limit lending in the context of falling consumption and investment .
Meanwhile, Jonathan Pincus, a former economist of the UN Development Program (UNDP) in Vietnam and presently Dean of the Fulbright Economics Teaching Program in Vietnam, said 5 percent GDP growth is a pretty good result for Vietnam.
“Economic growth might quicken a bit when the government boosts spending and completes plans before the end of the year, however, I don’t think that there will be big changes” Pincus said.
Economists think Vietnam will struggle to reach the 2012 GDP growth target of 5.2 percent recently set by the government.
To reach this target, Vietnam needs to record 6.5 percent growth in Q4, said Prime Minister Nguyen Tan Dung in a recent meeting of the National Assembly.
tuoitrenews
