Vietnam growth quickens to 5.83%, pointing to regional revival

Vietnam’s economic growth quickened to 5.83 percent in the first quarter from the same period last year, suggesting Asia may start to lead a revival in global expansion.

The figure released by the General Statistics Office in Hanoi on March 29 was almost twice as fast as Vietnam’s 3.14 percent expansion in the same period last year. Growth accelerated throughout 2009, culminating in a 6.9 percent fourth-quarter pace that resulted in a 5.3 percent full-year expansion. The government is targeting 6.5 percent growth this year.

Vietnam’s economic growth has been driven by foreign investment, a disciplined and literate labor force and low-cost exports, according to research published by Daiwa Capital Markets last week. In the past week, Malaysia raised its growth forecast, Japan reported the fastest export growth in 30 years, and Taiwan said industrial production rose for a sixth month.

“We’re seeing a two-track recovery with Asia forging ahead of the rest of the world, and Vietnam has consistently been one of Asia’s fastest-growing economies, so one would expect it to recover more quickly,” said Matt Robinson, a Sydney-based economist for Moody’s Analytics Inc.

“Vietnam’s growth model has been focused on low costs and abundant labor, and the evidence suggests that that model has been more resilient over the past 18 months, when many people put higher-end consumer discretionary expenditure on hold,” he said. Moody’s Analytics, a unit of New York-based Moody’s Corp., focuses on economic research and analysis.

Construction Demand

Industry and construction, which accounted for 43 percent of the economy during the period, expanded 5.65 percent from a year earlier, with the sub-component including construction alone growing 7.13 percent.

“We’re starting to see some increased demand in the construction industry now,” said Alan Young, Haiphong-based chief operating officer of Australian-listed steelmaker Vietnam Industrial Investments Ltd.

An increase in credit growth to as much as 38 percent last year has had a “lagged effect” on the Vietnamese economy, according to Australia & New Zealand Banking Group Ltd.

Services, which made up 42 percent of gross domestic product, expanded 6.64 percent from a year earlier. Hotels and restaurants grew 7.82 percent, while financial services grew 7.86 percent.

Fishing, forestry and agriculture, which accounted for 15 percent of GDP, grew 3.45 percent.

“Much of the growth was generated domestically, since exports were still contracting in the first quarter,” wrote Tai Hui, the Singapore-based head of Southeast Asian economic research at Standard Chartered Plc, citing strong retail sales.

“The government’s 6.5 percent growth target is within reach, as exports are likely to improve gradually in 2010, becoming a more potent engine,” Hui said, in a note dated yesterday.