Vietnam May Post 7.5% Growth in 2010, PXP Asset Management Says

Jan 20, 2010, 09:53

Vietnam’s economy may expand 7.5 percent this year, PXP Vietnam Asset Management said, which would be the country’s fastest pace of growth since 2007.

By Jason Folkmanis

Jan. 19 (Bloomberg) --

The General Statistics Office in Hanoi said Vietnam’s gross domestic product expanded 5.3 percent last year, the slowest since 1999, hurt by a slump in demand for exports and a drop in foreign direct investment amid the global recession. The International Monetary Fund expects 6 percent growth this year, while the Vietnamese government is targeting 6.5 percent.

Both the IMF and the government’s estimates may be exceeded as demand for Vietnamese products picks up, according to Ho Chi Minh City-based PXP. Vietnamese exports declined 10 percent last year, preliminary estimates by the statistics office show.

“A moderate resumption of global demand for Vietnam’s products should see a return to the 10-year average GDP growth trend of 7.5 percent this year,” Kevin Snowball, PXP’s chief executive, wrote in a note to investors yesterday. PXP manages funds including Vietnam Emerging Equity Fund Ltd. and PXP Vietnam Fund Ltd.

Vietnamese exports performed “reasonably well” in December, the IMF said this month. Overseas shipments climbed 12 percent from November to $5.25 billion, based on the preliminary statistics office figures, with garment exports advancing 12 percent from November and footwear sales up 22 percent.

Rice Prices

Rice exports from Vietnam, the world’s second-biggest shipper of the grain behind Thailand, surged 68 percent by volume in December from November, according to the statistics office. For 2009 as a whole, Vietnam exported a record 5.95 million tons of rice.

“Vietnam’s price quotes remain significantly below Thailand’s quotes, currently trading at a difference of nearly $125,” the U.S. Agriculture Department said in a monthly report on rice dated Jan. 13.

The acceleration in GDP growth is likely to be accompanied by faster inflation, according to Snowball. Vietnam’s consumer inflation rate reached 6.52 percent in December, up from 4.35 percent in November.

Inflationary pressures are probable, “particularly if expected increases in the price of food materialize,” Snowball wrote.

Vietnam is one of five Asian economies, along with India, Indonesia, Singapore and Sri Lanka, where inflation may top “the comfort zone” this year, HSBC Holdings Plc said in a report last week predicting that the year-on-year pace of price increases in Vietnam may accelerate to 12 percent by the second quarter of 2010.

HSBC expects “a combination of adverse base effects and higher commodity prices to see inflation return to double digits by the second quarter, if not earlier,” Singapore-based economist Robert Prior-Wandesforde wrote about Vietnam.

To contact the reporter on this story: Jason Folkmanis in Berkeley, California, at folkmanis@bloomberg.net