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Asian bank lifts growth outlook after stimulus   2009-09-23 - Viet Nam News

Viet Nam’s economic growth forecast has been revised up to 4.7 per cent for this year, while next year’s forecast sees growth powering ahead at 6.7 per cent.

A report released by the Asian Development Bank yesterday, September 22, tipped Viet Nam’s gross domestic product growth for 2009 to be 0.2 per cent higher than the figure projected earlier this year. The report said the revision was a result of the timely and strong policy measures that the Vietnamese Government had taken in minimising the adverse impacts of the global economic downturn.

Viet Nam’s forecast growth is the second highest in Southeast Asia after Laos, and together with Indonesia, is expected to grow faster than originally forecast.

But the Manila-based bank warned that Viet Nam’s Government must strike a balance between stimulating growth through demand-side measures and safeguarding macro-economic stability in light of inflationary pressure and the nation’s increasing fiscal deficit as well as the deficit in balance of payments.

"There are signs of a return of inflation, which can be aggravated by higher global commodity prices reflecting the recovery of the global economy on one hand, and the rapid growth of money supply on the other," said ADB country director Ayumi Konishi in the report.

ADB country economist Bahodir Ganiev said Viet Nam’s inflation decelerated sharply but was still higher than that of most countries in the region, partly because the State Bank of Viet Nam kept monetary policy loose.

Inflation hit 23 per cent in 2008 before the Government clamped down on credit growth.

In projections for 2009 and 2010, the report assumes the SBV will start tightening monetary policy towards the end of this year. It is also assumed that the Government will not take additional fiscal stimulus measures for the remainder of 2009 and during 2010.

"We very much appreciate the fact that monetary authorities have already started to take measures to keep inflation in check, and to damp devaluation expectations," said Ayumi.

Several experts have called for another economic stimulus package, in addition to the US$1 billion stimulus package the Government began implementing in January. The $1 billion stimulus was only part of a total of $8 billion that the Government plans to spend through 2011, focusing on infrastructure.

The Asian Development Bank also recommended that the Government avoid taking additional fiscal stimulus measures before thoroughly assessing the medium-term impacts of the measures that have already been adopted.

Strengthening macro-economic management is another measure suggested by the ADB expert.

The Bank also suggested Viet Nam adopt and start publishing data on an appropriate measure of core inflation.

Earlier this week, ADB lent Viet Nam $500 million to help it finance a ‘huge’ fiscal deficit.

Asia’s growth is more resilient than earlier thought, said ADB economist officer Chu Minh Hong. It’s due to a combination of factors, including fiscal and monetary stimulus provided by the governments and central banks, relatively healthy financial systems prior to the crisis and rapid turnaround in larger regional economies.

"In short, the 2010 outlook is for growth to come back strongly relative to 2009, giving a V-shaped trajectory to developing Asia’s recovery from the world recession," said the report.

Nevertheless, the forecast 2009 growth will still be the lowest since 1998 during the Asian financial crisis.

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BUSINESS IN BRIEF 22/9   2009-09-22