The Asian Development Bank (ADB) on September 22 revised up its GDP growth forecast for Vietnam for 2009 from 4.5 percent projected in March this year to 4.7 percent and maintained its projected growth of 6.5 percent for 2010.

The projections are part of the Asian Development Outlook Update 2009 which lowered its 2009 growth forecast for Southeast Asia to 0.1 percent from 0.7 percent and upgraded its economic growth forecast for 2009 in East Asia and South Asia to 4.4 percent and 5.6 percent respectively.

In launching the outlook update the same day in Hanoi, the ADB Country Director for Vietnam Ayumi Konishi said, “we can make this positive assessment as a result of the quick and strong policy measures the government has taken in minimising the adverse impact of the global economic downturn on Vietnam.”

“ Vietnam has certainly navigated itself through the crisis of global economic difficulties with very minimal negative affects on the economy,” he said. The government’s expansionary monetary and fiscal policies have boosted public consumption and domestically-financed investment, which partly offset the declines in the inflow of global funds.

Aside from the government’s large fiscal stimulus, the GDP growth forecast for 2009 is also based on oil output and net exports. Following years of decline, the output of crude oil grew by 17.9 percent year-on-year in the first half of 2009.

ADB said Vietnam ’s imports fell more steeply than exports, at a rate of 34.1 percent. As a result, net exports contributed to GDP growth. Although exports of seafood, coffee, crude oil and wood products fell more than 10 percent due to slumping external demand, this drop was partly offset by re-exports of gold, which accounts for 9 percent of total exports, as well as an increase in rice exports.

Vietnam ’s economic slowdown appears to have bottomed out early in 2009, with year-on-year GDP growth increasing to 4.5 percent in the second quarter from 3.1 percent in the first. Growth in the second half of this year is expected to accelerate to 5.4 percent, the bank said.

An ADB economist for Vietnam , Bahodir Ganiev, recommended that the government “also intensify its efforts to increase the stimulation of growth from the supply side which would involve accelerating economic reforms, improving the efficiency of the economy, and improving the business environment to address infrastructure bottlenecks and increase the supply of skilled labour.”

He also suggested promoting a more balanced economic structure with a bigger role for domestic demand as well as closer economic ties within the region, and strengthening macroeconomic management.

The ADB economist also raised a warning for Vietnam of a possible return of high inflation due to higher global commodity prices and the rapid growth of the money supply.

“We very much appreciate the fact that monetary authorities have already started to take measures to keep inflation in check, and to dampen expectations of devaluation,” said ADB Country Director for Vietnam Konishi.

The State Bank of Vietnam (SBV) has committed to limiting the growth of bank credit and total liquidity to 30 percent in 2009 and has urged all commercial banks to tighten consumer credit for spending and purchases of real estate and stocks./.