VNBusinessNews – Vietnamese authorities took aggressive action in the fourth quarter of 2008 to sustain growth, including interest rate cuts and currency devaluation, but exports and economic growth in 2009 will still be weaker, said Standard Chartered Bank’s latest report on Vietnam’s economy.

Vietnam’s high exports-to-GDP ratio is finally biting, combined with further consolidation in the real estate and construction industry. “This is reflected in our 5% real GDP growth forecast for 2009, compared with the government’s 6.5% target,” the report wrote.

Given the current circumstances, further rate cuts are on the cards following a very aggressive reduction in the base rate in Q4 2008. Now that inflation is less threatening, a weaker Vietnam dong is likely to take on the task of boosting exports and helping to reduce the trade deficit, commented Tai Hui, StanChart’s regional head of Economic Research in Southeast Asia.

According to his research, Vietnam’s real GDP growth slowed to 6.2% in 2008, the weakest since 1998, from 8.5% in 2007. “Our calculations show that growth in Q4 alone dropped to 5.7% year-on-year from 6.5% in Q3,” his research shows.

The slowdown can be attributed to the secondary sector, which includes manufacturing and construction – it expanded by just 4.8% year-on-year in Quarter 4, compared with its usual high single-digit or even double-digit performance in the past several years.

“We believe this reflects the impact of high local interest rates and credit tightening. Going forward, the sector is likely to remain in slow growth mode due to the external environment and the risk of stagnation in the domestic real-estate sector,” said Tai Hui.

The economist expected in 2009 Vietnam’s economic growth to slow further to 5%, while the manufacturing and construction sectors are likely to remain depressed. Declining commodity prices will hurt the primary sector, especially farming and mining. (SGT)