Viet Nam’s economic growth will slow to 6.2 per cent this year, with high inflation a key challenge for the country, according to the UN’s 2011 Economic and Social Survey of Asia and the Pacific.

The report, which was released in Ha Noi yesterday, was published by the UN’s Economic and Social Commission for Asia and the Pacific (ESCAP) and showed Viet Nam’s economic growth has been driven by strong exports and a buoyant domestic market.

“Manufacturing benefited from the global recovery with high demand for exports but also from the growing domestic consumer market,” said ESCAP economic affairs officer Pisit Puapan.

He added that production of garments, shoes, motorbikes, refrigerators and air conditioners all grew rapidly while the value of retail sales rose by 24.5 per cent.

Last year, prices rose on average by 9 per cent and hit a 22-month high with a December rise of 11.9 per cent due to a credit boom.

Le Xuan Ba, head of the Central Institute for Economic Management (CIEM) said last year’s inflation rate increased nearly 12 per cent over the previous year’s and in the first four months of this year has already exceeded 2011’s target of 7 per cent.

Ba attributed the high rate to both external causes, including global inflation, increasing input prices and natural disasters but also domestic causes such as high demand, rising purchasing power and foreign exchange rate adjustment.

Ba also warned that the country’s socio-economic situation needed to be monitored in the face of increasing inflation.

“The Government should be careful in dealing with potential socio-economic challenges by finding a balance between economic growth and inflation stabilisation and a more rational co-ordination between fiscal and monetary policies,” he said.

He said Viet Nam has adopted measures to resolve difficulties of capital, administrative procedures and to support people affected by natural disasters as well as pushing exports and controlling the trade deficit, to ensure stable growth.

The ESCAP report predicted regional economic growth of 7.3 per cent this year against last year’s 8.8 per cent.

China is expected to grow 9.5 per cent, while India and Indonesia’s economies are tipped to expand 8.7 per cent and 6.5 per cent respectively.

“However, the region’s growth outlook would much depend on risks including high cooking and fuel prices, sluggish recovery in rich nations, a deluge of volatile capital inflows and the after-effects of natural disasters,” said the report, adding that the regional economic impact of Japan’s recent earthquake and tsunami would be less severe than might have been initially expected.

The report warned that rising food and oil prices could lead to an additional 42 million people living below the poverty line in the region, joining the 19 million currently living in poverty.

It also warned that the Millennium Development Goal for poverty may be postponed by five years in some developing countries in the Asia-Pacific due to food price inflation and high oil prices.

The impact of the higher costs would be more severe in rural areas where the majority of poor people live, like India, Laos, Bangladesh and Nepal.

The report said heightened speculation in food commodities as well as poor harvests and increasing conversion of crops to biofuels had driven food prices as much as 35 per cent higher in some countries.

Protecting poor and vulnerable households by strengthening public food distribution systems, food vouchers and school feeding programmes were some of the mechanism’s the report recommended.

It urged governments to moderate prices through tariffs and tax policies, and to regulate speculative and counter-cyclical activity.

The report also suggested prioritising efficient and green agricultural practises to support economic growth.

Source: VNS