Vietnam's growth speeds as domestic demand gains

Hanoi: Vietnam's economic growth accelerated this quarter as domestic demand grew, sustaining pressure on policymakers to contain inflation that's among the fastest in the world.

Gross domestic product climbed 5.67 per cent from a year earlier in the second quarter, according to a preliminary estimate released by the General Statistics Office in Hanoi Wednesday.

That compares with a previously reported 5.43 per cent for the first three months. The economy grew 5.57 per cent in the six months through June, from a revised 6.18 per cent in the first half of 2010.

Vietnam's benchmark stock index has slumped this year on concern Prime Minister Nguyen Tan Dung's efforts to fight accelerating inflation, the trade deficit and currency weakness will crimp corporate earnings. Still, retail sales grew 22.5 per cent in the five months through May from a year earlier and inflation accelerated to 20.82 per cent in June, even after the central bank boosted borrowing costs.

"It's remarkable how rapid growth still is, considering the monetary policy tightening," Jonathan Pincus, a Ho Chi Minh City-based economist at the Harvard Kennedy School's Vietnam programme, said before the report. "Investment has probably slowed but the difference is being made up in private consumption."

The government has scaled back its growth forecast for 2011 to six per cent from an original prediction of seven per cent to 7.5 per cent. That would compare with 6.8 per cent last year.

"In contrast to the emphasis on growth in the past few years, the authorities' priority is now shifting to restoring macroeconomic stability," the IMF said.