Deputy Prime Minister Nguyen Sinh Hung (L) addresses the business conference on “Positioning Vietnam for the future” Tuesday in Hanoi

Vietnam’s economy will start to revive at the end of this year and quickly return to the growth trajectory seen before it was hit by domestic overheating and the global financial crisis, a government leader said.

The two-day Business Roundtable with the Government of Vietnam 2009 is organized by the UK’s Economist Group, which publishes The Economist magazine.

“All the indicators in February were much better and we hope that by the end of the year the economy will have new momentum for growth,” he said, noting the growth may be lower than previous years.

Asked why he was confident the recovery would come so quickly, Hung cited the quality of the labor force and the solid domestic market which would propel the economy forward before the rest of the world was over the worst, he said.

“We have internal strength and we have internal determination,” he said.

While credit growth has been “minimal” as businesses cut back on investment or expansion through retained earnings, Vietnam is still posting strong retail sales figures, Ho Chi Minh City-based fund managers Dragon Capital said in a monthly note.

Deputy PM Hung said the government had implemented “comprehensive measures” to address the slowdown, particularly to maintain exports, while focusing on maintaining the social safety network and stability.

The government said it would spend VND300 trillion (US$17 billion) this year to halt a slowdown in economic growth amid the global financial crisis. The amount, almost a quarter of the country’s $71 billion GDP, would be used to develop infrastructure, spur exports and fund other social development projects.

Vietnam aims to become an industrialized nation by 2020, a goal which the deputy prime minister said is “practical.”

It projects gross domestic product growth of 6-6.5 percent this year after a slowdown to 6.2 percent in 2008 from 8.5 percent in 2007.

Prime Minister Nguyen Tan Dung was quoted last month as saying the economic slowdown would end by May.

Good work

The World Bank’s acting director in Vietnam said his expectations for economic growth this year had been revised down to 5.5 percent from the 6.5 percent forecast late last year.

But Martin Rama said the government’s response to last year’s overheating put the country in a good position to weather the global crisis.

“There was a lot of adjustment, a lot of good work done last year and that positions Vietnam better than other countries,” Rama told reporters on the sidelines of the conference.

“Vietnam is not anticipated to have a crisis. [But] it is facing a slowdown.”

The government responded to gathering economic storm clouds late last year by unwinding the tight monetary position adopted earlier in the year, slashing interest rates and lowering banks’ reserve requirements.

“The government needs to support demand now in the short term. It will take several months before infrastructure picks up. And going the monetary route right now is the right way to go. It helps banks, which otherwise could face more difficulties,” Rama said.

But he added: “There will be limits to monetary policy and probably they are being reached right now.”

Although exports are a big factor in growth, the performance of some other sectors will also be critical this year, along with government stimulus measures.

“We believe that the key will be in the construction sector. The construction sector had a very bad year last year,” Rama said.

“We believe that the stimulus package can have an impact on construction and if there is a decent performance in the construction sector, then growth will be above the forecast by the Economist Intelligence Unit.”

Ahead of the meeting the Economist Group research and advisory wing, the Economist Intelligence Unit, forecast that Vietnam’s economy would grow at 0.3 percent this year.

Despite the forecast of near-zero growth, Vietnam is one of just four Asian countries expected to expand in 2009 along with China, India and Indonesia, Justin Wood, a Southeast Asia expert with the unit, told reporters.

Source: Thanh Nien, Agencies (With reporting by Ngan Anh)