IMF Sees Vietnam Strength, Even After Cutting Growth Forecast

By Jason Folkmanis

May 5 (Bloomberg) -- Vietnam’s economy is showing strength in areas including construction and domestic sales, and even with weakened growth prospects is expected to be among Asia’s top performers this year, the International Monetary Fund said.

The agency, which has 185 members, last month cut its forecast for Vietnamese economic growth in 2009 to 3.3 percent from a previous prediction of 4.8 percent. Neighboring Malaysia, Thailand and Cambodia are all expected by the IMF to contract this year.

Vietnamese construction output expanded 6.9 percent in the first quarter, a “surprise on the upside,” according to a note last month from Vietnam Property Fund Ltd. Retail sales of goods and services in the country grew 21.5 percent in the first four months, according to the General Statistics Office in Hanoi.

“We expect some recovery in agriculture in the remainder of 2009, and this combined with robust construction and resilient private consumption should provide support to economic activity despite continued weakness in manufacturing exports and foreign direct investment,” said Benedict Bingham, the IMF’s senior resident representative in Hanoi.

Bingham was commenting in a telephone interview yesterday, in response to questions about the lender’s reduction of its 2009 growth prediction for Vietnam.

“With the global environment this tough, some downward revision in growth was inevitable in 2009,” Bingham said. “Nevertheless, Vietnam is still going to be one of the strongest performers in the region this year, and we remain positive about the longer-term outlook for Vietnam.”

Weighed Down

Vietnam posted first-quarter economic growth of 3.1 percent, the slowest pace on record. The figure was weighed down by a 0.4 percent rate of growth in agriculture, forestry and fisheries, which accounted for 15 percent of gross domestic product.

“Agriculture was weaker than anticipated, principally because of the flooding that hit northern Vietnam earlier in the year,” Bingham said. “While this didn’t affect rice production much, it did affect other food crops.”

A 0.3 percent first-quarter contraction in manufacturing was also a weaker figure than had been expected, Bingham said. Still, construction activity was better than had been anticipated during the period, he said.

A government interest-rate subsidy program is sparking a “new credit boom” in Vietnam, Citigroup Inc. said last month. The worst phase of Vietnam’s economic slowdown may be over, Vinacapital Investment Management Ltd. said in a note released last week.

“Retail sales growth remained healthy” during the first quarter, Vinacapital said. “The residential real-estate market saw higher transaction volumes, as numerous apartment projects in both Hanoi and Ho Chi Minh City neared completion.”

To contact the reporter on this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net