HANOI - Vietnam's economic
performance in the first half of 2004, supported by a
better business environment and robust external demand,
suggests that gross domestic product (GDP) growth will
remain above 7% in 2004 and 2005, according to a major
Asian Development Bank (ADB) report just released.
The Asian Development Outlook 2004 Update issued
on Thursday by ADB, is an update of the Asian
Development Outlook 2004 released in April. Asian
Development Update is ADB's flagship economic
publication analyzing and forecasting economic trends in
the Asia-Pacific region.
Strong domestic demand
and exports are likely to push GDP growth to 7.5% in
2004 and 7.6% in 2005 after the 7.1% growth registered
in 2003, the report says.
Domestic demand is
forecast to increase by 8.7% and 8.1%, and exports by
16.3% and 12.0% in 2004 and 2005, respectively. Risks to
the outlook include rising inflation and possible public
health scares.
Inflation is likely to reach
about 9% by the end of 2004, due to higher food prices
and rising international commodity prices, and then ease
to 6.0% in 2005. Inflation above these levels could
exert upward pressure on the country's prime interest
rate, real wages and the foreign exchange rate.
Avian flu needs to be closely monitored by the
public health authorities as the disease has been
reported as recurring in 11 provinces over recent
months, though there has been no serious spread of avian
flu to humans. Domestic demand will be supported by a
continued expansionary fiscal stance. Industry is likely
to grow by about 10% in both years due to higher
international oil prices that benefit Vietnam as a net
oil exporter. Growth in services is estimated at 7.5% in
both years.
The agriculture sector, which
includes fisheries and forestry, will likely grow by
2.5% in 2004, partly because of slower growth in
traditional agriculture and forestry, but it is likely
to edge up to 2.7% in 2005 due to the expansion of
fishery activities.
With the ending of the
Multifiber Arrangement quotas at the end of this year,
members of the World Trade Organization (WTO), including
many of Vietnam's competitors, will secure greater
export opportunities. Vietnam, yet to enter WTO, will
still face constraints on its garment exports. But a new
quota with the United States and an expanded quota with
the European Union, as well as market diversification
are likely to make the prospects reasonable for garment
exports in 2005.
The trade deficit is forecast
at $3.8 billion in 2005, narrowing from ADB's April
forecast of $4.5 billion due to a better than expected
export performance and higher prices for export
commodities such as crude oil, rice, pepper, tea and
coffee in the first half of 2004. Remittances from
Vietnamese living abroad have become a major source of
foreign exchange, exceeding both foreign direct
investment flows and official aid flows.
The
Asian Development Outlook Update says, "The economy
needs to create jobs faster than it has in recent years
to absorb the greater numbers of new entrants to the
labor market."
(Asia Pulse)
Sep 24, 2004
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