Vietnam√Ę¬Ä¬ôs economy expanded at the fastest pace in more than a year in the fourth quarter as lending growth fueled construction and consumer sales.
Gross domestic product grew 6.9 percent from a year earlier after a revised 6.04 percent gain in the third quarter, the General Statistics Office said in Hanoi Thursday. For 2009 overall, the economy expanded 5.32 percent, down from 6.18 percent in 2008 and the slowest pace since 1999.
In the past decade, the nation of 86 million people has averaged 7.3 percent economic growth, boosted its per-capita income past $1,000, opened two stock markets, and joined the World Trade Organization. Thursday√Ę¬Ä¬ôs GDP figures demonstrate Vietnam√Ę¬Ä¬ôs resilience amid a global recession, said Kevin Snowball, chief executive of PXP Vietnam Asset Management.
√Ę¬Ä¬úOverheating is always a risk, but the government has anticipated that by diverting the focus away from growth to concentrating on controlling inflation,√Ę¬Ä¬Ě said Snowball, who√Ę¬Ä¬ôs based in Ho Chi Minh City. √Ę¬Ä¬úThe trade figures are improving with the global economy, and hopefully are sustainable.√Ę¬Ä¬Ě
Vietnam√Ę¬Ä¬ôs trade deficit narrowed 38 percent to $1.3 billion in December from a revised $2.08 billion in the previous month that was the biggest since April 2008, according to a separate report Thursday.
The full-year trade gap shrank 32 percent from 2008 to $12.25 billion, which may help the Vietnamese dong, which had weakened amid a recent widening in the monthly shortfalls. The fourth-quarter economic growth rate marks a quickening from 5.89 percent in the last three months of 2008, the Statistics Office said in a report accompanying Thursday√Ę¬Ä¬ôs GDP figures.
√Ę¬Ä¬úThey√Ę¬Ä¬ôve shown an acceleration in economic growth each quarter this year, which is impressive,√Ę¬Ä¬Ě Lawrence Wolfe, director of business development at DongA Securities Co. in Ho Chi Minh City, said before the report. √Ę¬Ä¬úThere may be a slight first-quarter dip, but exports should recover along with world markets, so 7 percent for 2010 is achievable.√Ę¬Ä¬Ě
Vietnam√Ę¬Ä¬ôs government unveiled stimulus worth about $8 billion to boost an economy that expanded 3.14 percent in the first quarter, the slowest pace on record. Measures included subsidies to encourage banks to offer loans, a program due to be scaled back in 2010.
√Ę¬Ä¬úFiscal stimulus played a huge role in supporting growth,√Ę¬Ä¬Ě Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore, said before the report. √Ę¬Ä¬úThere are pockets of concern, such as the extremely rapid lending growth.√Ę¬Ä¬Ě
Risk of overheating
Vietnam√Ę¬Ä¬ôs economy may be overheating, Nomura Holdings Inc. said this month, citing concerns that growth in lending is leading to imports that may not ultimately result in exports. Credit growth is expected to reach about 38 percent this year, according to the central bank.
The economy is √Ę¬Ä¬úgrowing too fast for the infrastructure and investment to repay itself,√Ę¬Ä¬Ě wrote Sean Darby, a Hong Kong- based strategist for Nomura, in a report this month that predicted inflation would reach 14.2 percent by the third quarter of 2010 and that the economy would expand 6.8 percent for the full year.
With inflation accelerating, the Vietnamese government said this month it would move away from a √Ę¬Ä¬úloose monetary policy√Ę¬Ä¬Ě and focus on economic stability. The central bank increased its benchmark interest rate to 8 percent as of Dec. 1 from the 7 percent level in place since February.
Industry and construction, which accounted for 40 percent of the Vietnamese economy this year, grew 5.5 percent in 2009 compared with 2008, according to Thursday√Ę¬Ä¬ôs report. The sub- category measuring construction alone gained 11.4 percent this year. The country√Ę¬Ä¬ôs construction industry is √Ę¬Ä¬úbooming,√Ę¬Ä¬Ě Barclays Plc said this month.
Services, which made up 39 percent of GDP, rose 6.6 percent for the full year. Domestic demand had experienced a √Ę¬Ä¬úfull recovery√Ę¬Ä¬Ě in Vietnam, Goldman Sachs Group Inc. said this month.
Agriculture, forestry and fisheries, which account for 21 percent of the economy, grew 1.8 percent in 2009. Vietnam is the world√Ę¬Ä¬ôs second-biggest exporter of rice and coffee.
Faster growth may help sustain a recent rally in the Ho Chi Minh City Stock Exchange√Ę¬Ä¬ôs VN Index, which has gained 14 percent in the past two weeks, and buoy profit outlooks for the bourse√Ę¬Ä¬ôs biggest companies, such as Vietnam Dairy Products Joint-Stock Co. and property developer Hoang Gia Lai Joint-Stock Co.
Investors should √Ę¬Ä¬úfocus on the positive performance of Vietnamese companies,√Ę¬Ä¬Ě DWS Vietnam Fund Ltd. said in a note this week that cited an average net profit increase this year of more than 50 percent for the country√Ę¬Ä¬ôs biggest corporations. √Ę¬Ä¬úVietnam continues to have one of the fastest growth rates in the region.√Ę¬Ä¬Ě