A series of fuel price hikes and floundering credit growth inspired economists to speculate that Vietnam’s economy will only expand by around 5 percent this year.

Vo Tri Thanh, deputy head of the Central Institute for Economic Management, a government think-tank, said the economy could get worse in the remaining months of 2012. Bad debt ratios remain very high and banks seem unwilling to boost lending, he noted adding that credit is unlikely to expand by more than 8 percent.

The country's gross domestic product, the broadest measure of economic output, will only grow 5.1-5.2 percent this year, he told news website VnExpress.

Economist Le Xuan Nghia projected a similar slowdown for Vietnam, adding that both inflation and GDP will depend on how quickly access to credit expands.

If banks speed up lending to ensure a 2 percent credit growth every month, the economy may grow by up to 5.6 percent, Nghia said, but warning that such a scenario would bring high risks of inflation.

Vietnam’s economic expansion already slowed to less than 5 percent in the first half of the year and Deputy Prime Minister Vu Van Ninh has publicly acknowledged that the country may miss its 6 percent growth target.

The International Monetary Fund forecast in early July that the economy will grow by 6 percent this year.

Alan Phan, chairman of the Viasa Investment Fund, said continual increases in fuel prices over the past month will not have a huge impact on inflation, which has been lower than expected this year.

However, the hikes will have a negative impact on economic growth, since input costs for almost all companies will rise, Phan said, adding that local businesses are already struggling with lowered demand.

Economic growth could slow to 4.8 percent if fuel prices keep rising, he added.

The Center for Economics and Business Research, a British research group, has said that Vietnam’s economy would continue to grow by more than 5 percent between 2012 and 2014, despite an expected dip caused by weaker exports this year.

The country is expected to pick up some of China’s manufacturing industry as monetary easing by the State Bank of Vietnam alleviates a banking system addled by bad debt, the group said earlier this year.

Thanh Nien News