Vietnam growth to be below potential: ANZ

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Vietnam is likely to grow below potential this year, achieving just 5.1 percent growth, Australia & New Zealand Banking Group Ltd has said.

At its Global and Vietnam Economics Update workshop in Hanoi Tuesday, it said an improved global economy and Vietnam's faster structural reforms of the banking system and state sector would help the country get back to 7 percent growth.

Hanoi-based business news website Nguoi Dong Hanh quoted Glenn Maguire, ANZ's chief economist for the Asia-Pacific region, as saying both economic growth and inflation would bottom out this year.

Growth would be 5.3 percent next year and 5.8 in 2015, he said.

Consumer prices, after rising 6 percent this year, would go up by 8 percent and 7.5 percent in the next two years, he said.

ANZ said the banking industry's troubles are the most challenging for Vietnam. Lending to businesses has been weak this year with credit growth until July being just 5.3 percent against the full year's target of 12 percent.

The cleanup of bad debts has ostensibly improved, with the ratio declining to 4.46 percent in June from 4.65 percent a month earlier.

But international rating agencies estimate the real level to be around two times that figure. 

ANZ saw foreign direct investment as a bright spot in the economy amid the low consumer demand. Foreign investors pledged a total of $9.3 billion in the first nine months, up 52 percent compared to the same period last year.

The dong traded at 21,120 per dollar on October 23, and ANZ expected the currency to keep dropping to a level of 21,500 by mid-2014.

Prime Minister Nguyen Tan Dung said last month the central bank would not weaken the dong by more than 2 percent this year. It had devalued it by 1 percent in June.

Vietnam's growth forecast by ANZ is one of the lowest by any international or local forecaster this year.

Dung said GDP growth could be 5.4 percent this year, while the World Bank estimated a 5.3 percent rate, the same as the National Financial Supervisory Commission.

The Philippines-based Asian Development Bank expects the economy to expand by 5.2 percent.

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