The report said domestic consumption is an important factor for the recovery process, with retail sales increasing 9.3 percent in the eight months from the same period last year. In the first quarter of 2009, Vietnam’s GDP rose by only 3.1 percent year on year, which is four percent lower than the average first-quarter growth for the last few years.
The Vietnamese government announced a stimulus package that includes various measures, from an interest rate subsidy to tax breaks and additional capital spending. Consequently, the country’s GDP grew by 4.5 percent in the second quarter and 5.8 percent in the third, raising real GDP growth to 4.6 percent year on year for the first nine months of 2009.
The WB report added that the construction industry is a leading factor of the recovery, with its value-added projected to reach a double-digit growth rate for 2009.
The WB believes the Vietnamese economy navigated the crisis relatively well although the UN agency forecasts Vietnam will have a growth rate of 5.5 percent for the entire year 2009.
The global economic recession has had a significant impact on the Southeast Asian country’s exports, which earn 70 percent of its GDP. Over the first eight months of 2009, Vietnam’s exports declined by 14.2 percent in dollar terms from the same period last year. Export turnover is down across most items and in most of Vietnam’s traditional markets.
The report said spending has increased substantially due to stimulus expenditure and the government’s commitment to ensuring social welfare. Monetary policy has been loosened dramatically to support domestic demand after a period of tightening in 2008 to tackle overheating. The State Bank of Vietnam cut its policy rate by half to seven percent from mid-2008 to February 2009, which has helped accelerate bank credit growth.
In addition, the WB remarked that poverty levels continued to fall in Vietnam, despite the sharp increase in food and fuel prices through the first half of 2008, followed by a period of sluggish growth into 2009. Poverty Assessment (PPA) carried out in early 2008 in rural communities underscores Vietnam’s recent progress in developing rural infrastructure, ensuring better access to services, raising agricultural productivity in many regions and providing more opportunities to diversify rural income sources.