Vietnam’s gross domestic product expanded 5.8 percent in the third quarter from a year earlier, up from 4.5 percent in the previous three months, according to figures this week from the General Statistics Office in Hanoi. The government is targeting growth of at least 5 percent this year.

Growth for the first nine months of 2009 reached 4.6 percent and the IMF yesterday increased its forecast for the full year to that figure, up from a previous estimate of 3.5 percent. Still, the latest projection didn’t take the third- quarter numbers into account, according to Benedict Bingham, the IMF’s senior Vietnam resident representative.

“It may get revised upwards,” said Bingham, in a telephone interview today from Hanoi. “The encouraging resilience of economic activity reflects partly the underlying strength of the Vietnamese economy, but the stimulus package clearly also contributed to the uptick in activity in the second and third quarter.”

Vietnam put in place a fiscal stimulus package that it values at 8.6 percent of GDP in a bid to boost the economy, which grew 3.1 percent in the first quarter, the slowest pace on record. Measures included tax exemptions, reductions and deferments for businesses, and an interest-rate subsidy program.

Construction rebound

“The robust rebound in construction suggests that the stimulus package was quite a significant factor, at least in that sector,” Bingham said.

Industry and construction, which account for 40 percent of the Vietnamese economy, grew 4.5 percent in the first nine months of the year, with the sub-category measuring construction alone expanding 9.7 percent. Services, which make up 38 percent of GDP, grew 5.9 percent in the first three quarters.

The stimulus package may increase Vietnam’s budget deficit to as much as 10.3 percent of GDP from 4.1 percent in 2008, the Asian Development Bank said last month. Inflation pressures re- emerged in Vietnam in the second quarter, the ADB said.

Vietnamese inflation accelerated in September for the first time in more than a year. The IMF is “encouraged” by recent government statements that there will be a greater focus on reining in inflation, Bingham said.

“Vietnam still has to maintain a careful balance between maintaining macroeconomic stability and supporting economic activity,” he said. A greater focus on inflation and the balance of payments “is appropriate in our view, especially given the signs that economic activity is holding up relatively well,” Bingham said.

Source: VietNamNet/Bloomberg