Growth quickens as exports counter bank slump

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Workers at a plant of Nokia Oyj mobile phone manufacturer in Bac Ninh Province

Vietnam's economic growth accelerated as exports climbed, even as banks struggled to meet the government's lending target.

Gross domestic product rose 6.04 percent in the fourth quarter from a year earlier, quickening from a 5.54 percent gain in the three months through September, according to data released by the General Statistics Office in Hanoi this week. For the full year, the economy grew 5.42 percent, faster than a 5.25 percent pace in 2012, and the median estimate of 5.3 percent in a Bloomberg survey.

Manufacturers from Samsung Electronics Co. to Nokia Oyj have boosted Vietnam's exports, which grew 15.4 percent this year from a year earlier. That has helped offset faltering bank lending, as the government takes steps to resolve bad debt and overhaul the financial system.

"The economy is steadily recovering," said Fiachra MacCana, managing director of Ho Chi Minh City Securities Corp. "Exports are still the main driver, especially for Vietnam's manufacturing industries, but there's a little bit of domestic backup there. It's a broad-based recovery."

The benchmark VN-Index has gained more than 22 percent this year, the biggest advance among major Southeast Asian indexes. The dong has slipped more than 1 percent in 2013.

Foreign projects

Vietnam's growth is being supported by exports and foreign investment, the International Monetary Fund said this month. The country's exports-to-GDP ratio increased to 75 percent last year from 56 percent in 2009, according to IMF data.

Vietnam received US$11.5 billion in disbursed foreign direct investment this year, a 10 percent increase from last year, the Statistics Office said on December 23. Pledged FDI was $21.6 billion, a gain of 55 percent from a year earlier, it said.

Higher costs and wages in China are prompting some companies to set up manufacturing in neighboring Asian economies. Samsung, the world's biggest smartphone maker, is building a $2 billion plant in Vietnam that may make 120 million handsets a year by 2015, according to two people familiar with the company's plans who asked not to be identified because the matter is private.

"The Mekong region, led by Vietnam, is evolving into a strategic manufacturing destination for multinational corporations," said Eugenia Victorino, a Singapore-based economist at Australia & New Zealand Banking Group Ltd. "We see foreign direct investment as supportive of the export industry."

Services rise

Still, year-to-date retail sales growth in December was slower than a year earlier. The central bank said on December 16 that bank lending may rise about 9 percent this year, lower than an earlier target of 12 percent. It has cut the refinancing rate to 7 percent from 15 percent at the beginning of 2012.

Prime Minister Nguyen Tan Dung plans to complete a revamp of state-owned enterprises by 2015 and has set up an asset management company to clear bad debt at lenders. The economy may grow 5.4 percent in 2014, the World Bank said this month, slower than a government target of 5.8 percent.

Services, which made up 43 percent of the economy, grew 6.6 percent in 2013 from a year earlier, while industry and construction, which accounted for 38 percent of GDP, expanded 5.4 percent, data from the Statistics Office showed.

Inflation quickened to 6.04 percent in December, data showed. Dung told the central bank earlier this month price gains must be kept at 6.5 percent to 7 percent in 2014.

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