Vietnam Growth Slowing to Nearly Zero

March 16, 2009
Growth in 2008 was 6.2%

Vietnam's red-hot economic growth will cool to just 0.3% this year, well below the government's 6.5% target, the Economist Intelligence Unit said on March 16.

Despite near-zero growth, Vietnam is one of just four Asian countries expected to expand in 2009 along with China, India and Indonesia, said Justin Wood, a Southeast Asian expert at the global research and advisory firm. "I think if you look at the regional context in Asia, it's actually not that bad," he said. Wood was speaking to reporters ahead of a two-day conference of business and government leaders on the future direction of export-dependent Vietnam.

He said in 15 years, the country has moved from a low to a middle-income country, like Indonesia or the Philippines, but the issue was whether it could now follow Taiwan and South Korea into the high-income bracket.

"As we look at Vietnam's future we see a country with enormous potential but the question is, will it become the next Philippines or will it become the next South Korea?" Wood said.

Vietnam recorded 6.2% growth in 2008, the lowest level in almost a decade and a sharp drop from 8.5% in 2007.

Wood blamed the low growth forecast on a slump in demand from key export markets the U.S., Europe and Japan, saying with this year's shipments set to fall in value by 31%.

He said investment that goes into creating new factories and capacity will also be hit, with the Economist Intelligence Unit seeing foreign direct investment falling by 70% year-on-year to $2.2 billion for 2009.

Largely because of export weakness, unemployment will jump to 8.2%, from 4.7% last year, posing a political challenge for the government, the analyst figures show. "Rising unemployment is unavoidable and I think that is going to put pressure on the government to improve its performance and its responsiveness in dealing with the people," Wood said.

The government has announced a stimulus package of spending and tax cuts to boost the economy, which the International Monetary Fund has predicted could grow at 5%.

Prime Minister Nguyen Tan Dung, who is to address the conference on March 17, was quoted last month as saying communist Vietnam's economic slowdown would end by May.

Copyright Agence France-Presse, 2009

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