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Vietnam GDP Growth Rate Accelerates to 8.4%, Fastest Since 1996

Jan. 3 (Bloomberg) -- Vietnam's economy expanded last year at the fastest pace in almost a decade, led by gains in construction, tourism and telecommunications.

Gross domestic product grew 8.4 percent in 2005, according to preliminary figures released by the General Statistics Office in Hanoi. The figure is up from a 7.8 percent expansion in 2004 and is the fastest since 1996, the Statistics Office said.

Vietnam, which has cut poverty in half since 1993, wants to move out of the ranks of the world's lower-income nations by 2010. The government aims at achieving the target by spurring economic growth higher than the 7 percent average in the five years between 2000 and 2004 even as inflation exceeds forecasts.

``Vietnam is poised to move out of the ranks of the poor countries to take its rightful position among the successful developers of East Asia,'' said Jordan Ryan, the United Nations' Development Program's outgoing resident representative for Vietnam, in remarks at a conference last month in Hanoi.

Gross domestic product in the country of 84 million people could grow more than 10 percent annually if inefficiencies in the economy are eliminated, the World Bank said last month.

``Vietnam's economic growth rate is still low compared with the country's development potential,'' Minister of Planning and Investment Vo Hong Phuc said in written answers to questions from Bloomberg News. ``Vietnam has many advantages that could allow us to develop even faster than China.''

Accelerating economic growth helped push Vietnam's inflation rate to 8.4 percent in December from a year earlier. The government has originally targeted keeping inflation below 6.5 percent last year.

Construction

Industry and construction -- which now make up 41 percent of the Southeast Asian nation's economy, up from 38 percent in 2001 -- expanded 10.6 percent last year, with the category for construction alone growing 10.8 percent.

``If the market for construction materials develops in the future, it will be very good for the country in general,'' said Pham Trong Nhan, general director of Nhi Hiep Brick-Tile Joint- Stock Co., in an interview on Dec. 16. ``The more the country develops, the more our industry will grow.''

Processing industries, a category that includes Vietnam's garment industry, grew 13.1 percent last year, according to the Statistics Office. Garments and textiles are Vietnam's second- biggest export industry after crude oil, with overseas shipments rising 10 percent in 2005.

Services, which account for 38 percent of the Vietnamese economy, expanded at an 8.5 percent rate, up from a 7.3 percent growth rate in 2004, the Statistics Office said.

Tourism

``I see services growing faster than the economy overall,'' in the future, said Il Houng Lee, Hanoi-based senior resident representative of the International Monetary Fund in Vietnam, in a Dec. 27 telephone interview. ``There have been many developments in areas such as telecommunications and tourism.''

The hotel and restaurant trade jumped to a 17 percent growth rate, up from 8 percent growth in 2004, while a category including tourism grew 9.6 percent, up from 8.1 percent in 2004. The number of foreign visitors to the country grew by 18 percent, buoyed by a 29 percent surge in tourist arrivals, according to the Statistics Office.

``We see an influx of traffic coming from the United States,'' said Joe Mannix, Vietnam country manager for United Airlines, speaking to journalists in Ho Chi Minh City on Dec. 9. ``Our advanced passenger load factors are ahead of last year for this time.''

Agriculture, forestry and fisheries -- which accounts for 21 percent of the Vietnamese economy, down from 23 percent in 2001 -- grew 4 percent last year.

``I would expect to see a slight decline in agriculture as a percentage of the Vietnamese economy,'' said the IMF's Lee. ``In the agricultural sector, I don't foresee any rapid increases in productivity.''


To contact the reporter on this story:
Jason Folkmanis in Tainan, Taiwan  folkmanis@bloomberg.net
Last Updated: January 2, 2006 21:57 EST

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