Vietnam's economic growth slows to three-year low

Vietnam's economic growth in the first quarter of 2012 slowed to a three-year low as domestic demand weakened and as local industries grappled with high inventories. First-quarter growth slowed to 4 percent from a year ago, the lowest rate since January-March 2009, according to government data. The south-east Asian economy grew 6.1 percent in the last quarter of 2011.
"The economy continues to grow, but at a pace slower than the same period in previous years," the government said in a statement issued late on Sunday, citing Planning and Investment Ministry data. Even though inflation is slowing, Vietnam's economic growth has been hurt partly by stockpiles of products in the industrial sector, Deputy Minister of Planning and Investment Cao Viet Sinh told Reuters last week.
"We do not expect the GDP growth rate to reach a high level in the first quarter," Sinh said. "The reason was industrial production has been facing difficulties due to high inventory," adding that prices have been stabilising since the end of 2011. Industrial production in the first quarter slowed to 4.1 percent from a year ago, from 9.3 percent in the same period in 2011, according to a report from the Planning and Investment Ministry delivered at a government meeting on Sunday.
In 2011 the industrial sector contributed about a third to Vietnam's gross domestic product value. People have cut spending, Sinh said. "We need to keep watching the risks of high prices in the coming months as we expect price fluctuations to continue," he added. High interest rates may have deterred investment, hindering economic growth, analysts said.
"Vietnam's low economic growth in the first quarter was a result of the fact that many domestic companies did not access loans to boost their production due to high interest rates," said Giang Trung Kien, head of research at FPT Securities in Hanoi. Experts have called on the government to cut lending rates to help ease difficulties for businesses as part of measures to accelerate the economy, the statement said. Vietnam's central bank asked lenders last Thursday to bring down lending rates following cuts in major interest rates as the government aims to ease the burden on businesses.
On Sunday Prime Minister Nguyen Tan Dung and government officials met to consult with more than 30 Vietnamese scientists and economists on macro economic policies, especially those in finance, monetary sectors, the government's statement said. "Keeping inflation at a single digit and maintaining the economic growth of around 6 percent in 2012 requires a great effort," the statement cited economists as telling Dung and other government officials at the meeting.