HANOI, Vietnam: Vietnam’s high economic growth target could hurt the country in the long term if it fails to clamp down on spiraling inflation, the Asian Development Bank warned Tuesday.
The government aims to bring down surging inflation, which hit a 17-year high of 28.3 percent in August, to single digits by the end of 2009. It also has lowered its growth target to 7 percent this year from 8 percent.
“Our suggestion to the government of Vietnam is that it probably aims for lower growth rate with lower inflation and lower trade deficit next year,” said Ayumi Konishi, ADB country director for Vietnam told reporters.
“Then Vietnam will be able to aim at much higher growth in 2010,” he said.
The ADB projects Vietnam’s economic growth will slow. In its global development outlook update, released Tuesday, it revised the growth target for Vietnam this year down to 6.5 percent from 7 percent. In 2009, it projects 6 percent growth, down from the previous estimate of 8.1 percent.
“If you look at historical lessons of many countries in controlling inflation, stabilizing macro economy, actually you will almost never find any country which has succeeded in controlling inflation and at the same time promoting growth,” Konishi said.
Konishi said Vietnam could achieve higher growth than projected by the ADB, but they can achieve that with “the cost of higher inflation and widening trade deficit.”
The country’s trade deficit continued to widen in the first eight months of the year, reaching nearly US$16 billion already more than the US$14.1 billion for all of 2007.
With the global economy slowing, “if Vietnam tries to go against that, you will be inviting a very high inflation and then this time it will be more difficult to control,” Konishi said.