Vietnam reports GDP growth of 6.5 per cent in first half of 2008

Jul 2, 2008, 10:50 GMT

Hanoi - Vietnam recorded GDP growth of 6.5 per cent for the first six months of the year, the lowest rate in recent years, the government said Wednesday.

The government's General Statistics Office (GSO) said economic growth in the first six months of 2008 was lower than in the previous years due to a 'complicated situation' in the world economy.

'To realise the GDP growth target of 7 per cent for 2008, Vietnam must try to obtain an economic growth of at least 7.4 per cent in the second half of the year,' GSO director Nguyen Duc Hoa said.

Vietnam posted 7.36 per cent growth in the first six months of 2006 and 7.91 per cent in the first half of 2007, according to GSO figures.

The office said inflation slowed slightly in June to 2.14 per cent, compared with 22.19 per cent in May, but it has reached 18.44 per cent since the beginning of this year.

Food prices saw the largest increases, 59.4 per cent, followed by construction materials' prices, which rose 14.3 per cent.

Vietnam's trade deficit nearly tripled from the same period last year, reaching 14.8 billion dollars in the first six months of 2008. It has already exceeded last year's total trade deficit by 700 million dollars, according to GSO.

Despite high inflation, the country attracted 31.6 billion dollars worth of foreign direct investment commitments so far this year, compared to last year's total inflow of 21.3 billion dollars, it said.

Vietnam is desperate to bring down its inflation rate, which is hurting the country's exports, driving workers to strike for higher pay and damaging confidence in the currency.

Late last month, the Ministry of Planning and Investment announced a list of 1,600 state budget-funded projects with combined investment of 5.5 trillion dong (more than 330 million dollars) to be delayed.

The government also pledged to reduce expenditures on 'off-budget' bond-funded infrastructure projects by 25 per cent, representing a cut of more than 8 trillion dong (480 million dollars).

Further, the government has ordered large state-owned enterprises to cut back on unnecessary expenditures and investments in non-core business areas.

Last month, the state shipbuilding conglomerate Vinashin announced it was pulling out its 1-billion-dollar investment in a 5-billion dollar steel mill project it had entered with South Korean firm Posco. Vinashin is also delaying or slowing 49 other projects worth a total of 6.5 trillion dong (392 million dollars).

In May, the National Assembly revised the 2008 GDP target to 7 per cent, down from between 8.5 and 9 per cent.