Global slowdown a threat to Vietnam's recovery: WB HANOI: The accelerating slowdown in the global economy is threatening to take the edge off Vietnam's recovery just as the Communist authorities win international endorsement for ambitious growth plans, the World Bank warned on Friday. Declining world demand had sparked a sharp fall-off in Vietnam's export growth in the first five months, particularly in manufacturing, the bank said in a report prepared for a meeting of international donors. Exports of manufactured goods rose just 0.8 per cent to May compared with 29 per cent in the same period of last year and 16 per cent over the whole of 2000. "We are worried that manufacturing exports are not growing at the rate that they were or ought to. If you look at electronics or footwear, you see the same decline," said World Bank country director Andrew Steer. Plummeting world commodity prices had also led to a sharp fall in earnings from Vietnam's key agricultural exports - rice, coffee, pepper and rubber - which had seriously affected the purchasing power of the 70 per cent of Vietnamese who live in the countryside. Farm exports were continuing to rise sharply in volume terms but were earning Vietnam less money. Total agricultural exports rose 2.7 per cent by volume over the first five months but fell 46.5 per cent by value. The resulting decline in purchasing power for Vietnam's rural masses was already sparking a fall-off in consumer demand after a sharp rise last year following three straight years of recession. "In the first months of 2001 the expansion in retail sales tapered off - to a large extent because depressed cash crop prices have eroded farmers' terms of trade and thereby slowed down demand for consumer goods," the bank's report said. Steer said that there was no easy solution to the decline in rural earnings. The World Bank was expected to approve $100 million in credits next week for commune-level projects in the countryside. But the only long-term solution was crop diversification as commodity prices were not expected to recover any time soon. He predicted real gross domestic product (GDP) growth for 2001 of around 5.5 per cent, roughly the same as last year. The government needs to achieve growth of at least 7 per cent a year if it is succeed in its ambitious goal of doubling GDP over the next decade. The bank said the worsening international context made it all the more important that the government stick to the timetable for accelerated market reforms which it had thrashed out over the past few months with the backing of the international community. "Vietnam's determination to remove impediments to sustainable growth is therefore all the more timely and urgent," it said. The government's adoption of a detailed timetable for long-awaited reforms of the state sector and banking system, trade policy and public expenditure, had had an "important effect in improving business sentiment." "The challenge now is implementation." (AFP)
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