Vietnam Cuts 2008 Economic Growth Forecast to 6.7%

By Van Nguyen

Nov. 3 (Bloomberg) -- Vietnam cut its economic growth target to 6.7 percent for this year, lower than an earlier forecast of 7 percent, the government said in a statement posted on its Web site.

This year's exports will be $1 billion less than the $65 billion projected at the beginning of the year, the government said in the statement dated Nov. 1.

Vietnam's economy is faltering as the global financial crisis hurts demand for exports, while floods in the past week destroyed crops and caused diseases to spread in cattle and poultry. The country's exchange rate and tax policies should be flexible to promote production and exports, and banks should cut borrowing costs, the government said in the statement.

The country's annual inflation slowed for a second month in October and the monthly inflation rate declined for the first time since March 2007. Consumer prices climbed 26.7 percent in October from a year earlier, the government reported Oct. 25.

Prices are expected to gain about 22 percent this year, the government said in the Nov. 1 statement.

Vietnam will have to maintain economic growth of between 6 percent and 6.5 percent next year, and an increase in exports of 12 percent, the government said. Vietnam's Ministry of Trade and Industry on Oct. 22 set a target of an 18 percent increase in exports next year to $77 billion.

Commercial banks should lower borrowing costs to ease a capital shortage among companies, the statement said.

Highest Rates

Vietnam's interest rates are the highest in Asia, together with Pakistan's, even after the central bank on Oct. 20 cut the benchmark rate to 13 percent.

Exports have declined to $5.1 billion in October, from $5.3 billion in September and $6.1 billion the previous month, the government reported. Exports totaled $53.8 billion and imports were $70.1 billion in the first ten months of the year, according to the statement.

The government will not control electricity and coal prices next year, according to the statement. The country on Oct. 30 cut gasoline prices for a fourth time last month after crude oil declined.

Floods and heavy rains in Vietnam's northern and central provinces have killed at least 49 people and damaged almost 55,000 houses, 183,000 hectares (452,000 acres) of rice and other crops, and 9,700 hectares of fish farms, Tuoi Tre newspaper reported today.

To contact the reporters on this story: Van Nguyen in Ho Chi Minh City at vnguyen23@bloomberg.net