In its recent Outlook 2011 report, the Asian Development Bank (ADB) predicts Vietnam’s GDP growth this year will be 5.8 percent and inflation, 18.7 percent.
The government’s Resolution 11 released early this year is a timely response to the double-digit inflation, draining forex reserves and a devaluating local currency, said Tomoyuki Kimura, ADB’s country director in Vietnam.
Kimura said though the resolution, a package of tightening fiscal and monetary policies, has helped stabilize the forex rate, raise forex reserves and reduce month-on-month inflation from June to August, year-on-year inflation has exceeded 20 percent, which is the highest in Asia-Pacific.
Dominic Miller, ADB’s chief economist, said the government must patiently implement Resolution 11 to control inflation so that interest rates can be lowered. As inflation drops, surviving businesses can start to grow again and the public will again turn to the dong as their confidence returns.
Kimura said the consistent implementation of Resolution 11 is more important than stimulating economic growth in the current context as it will restore the confidence of investors.
For Vietnam, restoring macroeconomic stability is the immediate priority, followed by urgently solving the root of inflation – the bottleneck in production, investment and effectiveness of the group of state-owned enterprises (SOEs), he said, adding that Vietnam’s growth may reach 6.5 percent and inflation may cool off to 11 percent next year.
ADB forecasts growth in 2011 in Asia (excluding Japan) would be 7.5 percent, compared to 7.8 percent as previously forecast and the regional inflation rate would be 5.8 percent compared to 5.3 percent as previously forecast.
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