Vietnam's 2008 Industrial Production Exceeds Target by 11%, but Growth Rate Slows to 6.23%

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Researched by Industrial Info Resources (Sugar Land, Texas)--The General Statistics Office of Vietnam (Hanoi) has reported that the country's industrial production value in 2008 exceeded the annual target set by the National Assembly for the year by 11%. The office also declared that the value of total industrial production in 2008 of $38.4 billion was higher than that in 2007 by 14.6% but represented a lower growth rate than the annual rate achieved in earlier years, on account of the prevalent financial turmoil worldwide.

Foreign-invested enterprises accounted for 40.1% of the total industrial production value and registered a growth rate of 18.2%. These were followed by private enterprises that accounted for 34.5% of the total industrial production value and registered a growth rate of 18.5%. State-owned enterprises accounted for 25.5% of the total value with a growth rate of 5%.

The office attributed the surge in output to strong growth in the processing and manufacturing sector that generated $33.2 billion, accounting for 88.9% of the total industrial production value, and registered a year-over-year growth rate of 16%. The power sector grew by 12.3% year over year and generated 75 billion kilowatt-hours of electricity.

Certain key industrial products that registered a low year-over-year growth rate included motorbikes, paper and cardboard, and fertilizers, which grew by 5.5%, 2.3% and 1%, respectively. Other products that registered negative growth rates include steel bar, declined by 10.6% to 3.5 million tons; crude oil, which dropped by 6.6% to about 317,000 barrels per day; coal, which slipped by 6.1% to 40 million tons; and cotton fabric, which slumped by 1.8% to 242 million tons.

In 2008, Vietnam's economy expanded at the slowest pace since 1999, being crippled by high interest rates and lending restrictions early in the year, followed by the global economic recession that hurt the country's tourism sector. The country's gross domestic product (GDP) grew 6.23% in 2008 to $85.08 billion compared with 8.5% in 2007. Expansion plans failed to achieve the 6.7% target set by the government, which had targeted 9% earlier in the year.

Growth in the industrial and construction sectors, which accounted for 40% of the country's economy, slowed to 6.3% in 2008 from 10.6% the previous year. This was followed by the services sector, which accounted for 38% of the GDP and grew at 7.2%, as opposed to 8.7% in 2007. Agriculture, fisheries and forestry, which accounted for 22% of the GDP, grew at 3.8%, compared with 3.4% in 2007.

Vietnam is targeting an economic growth rate of 6.5% in 2009. The International Monetary Fund predicts an economic expansion of 5% for Vietnam in 2009. The government is likely to introduce a $6 billion plan to stimulate demand and boost the economy. The funds will be used to promote production, business and consumption, reduce taxes imposed on businesses, and deduct interest rates, among other measures. The country's power sector is also slated to grow at a rapid pace of about 17%-22% until 2015. The Bank for Investment & Development of Vietnam (Hanoi) plans to offer $1.77 billion to stimulate investment and consumption and to promote exports.

However, analysts believe that Vietnam's aggressive pursuit of economic growth could be risky since the nation has a current account deficit of 13% of its GDP. They further believe that for the proposed policy to succeed, Vietnam would require a sustained inflow of large foreign direct investments as has been seen in the recent past, but this would be difficult because of the credit crunch and risk-averse tendencies prevalent in the global market.

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