Vietnam faces risk of asset price bubbles: World Bank

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Vietnam faces the risk of asset bubbles and price busts similar to 2008, but it can likely maintain economic growth, a senior World Bank official said on Monday.

Decisive steps helped tame soaring inflation in 2008, and then the authorities performed an effective u-turn to maintain growth in the face of the global slowdown, said James Adams, World Bank Vice President for East Asia and the Pacific.

"Now we are again in a situation where some import challenges remain for the government, but we remain convinced that Vietnam's pragmatism and sometimes heterodox measures have provided an important framework to sustain growth and we think that likely can, in fact, be maintained," Adams said.

But, listing some of the challenges, he cautioned, "on the relative prices front, and this goes back to the overheating of two years ago, the economy remains very open, capital markets are thin, and so there are risks of dangerous volatility in asset prices".

The Ho Chi Minh Exchange index fell 80 percent from a life high of 1,170.67 points in March 2007 before bottoming out at 234.66 in early February 2009. It has risen since, and on Monday the market closed at 511.58 points.

Property prices in Vietnam have also experienced boom and bust cycles.

On Monday, State Bank of Vietnam Governor Nguyen Van Giau said gross domestic product growth in the first quarter would be about 6 percent from a year ago, exceeding expectations.

Fuelled by government stimulus, the economy leapt 6.9 percent in the fourth quarter from a year earlier, its quickest pace since early 2008. The economy expanded 5.32 percent in the full year 2009, the slowest rate since 1999.

The government is targetting growth of 6.5 percent this year, while Prime Minister Nguyen Tan Dung said in January the economy could grow as much as 7 percent.

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