Identifier
Created
Classification
Origin
09HANOI37
2009-01-14 03:51:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Hanoi
Cable title:
VIETNAM'S ECONOMY 2008: SLOWER ECONOMIC GROWTH, RECORD FDI,
how-toVZCZCXRO6165 PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB DE RUEHHI #0037/01 0140351 ZNR UUUUU ZZH P 140351Z JAN 09 FM AMEMBASSY HANOI TO RUEHC/SECSTATE WASHDC PRIORITY 9009 INFO RUEHHM/AMCONSUL HO CHI MINH 5476 RUEHGP/AMEMBASSY SINGAPORE 2733 RUCNASE/ASEAN MEMBER COLLECTIVE RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION RUEATRS/DEPT OF TREASURY WASHINGTON DC RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
UNCLAS SECTION 01 OF 02 HANOI 000037
SENSITIVE
SIPDIS
STATE FOR EAP/MLS MBROWN
SINGAPORE FOR TREASURY
TREASURY FOR SCHUN
USTR FOR DBISBEE
E.O. 12958: N/A
TAGS: EINV ECON VM ETRD
SUBJECT: VIETNAM'S ECONOMY 2008: SLOWER ECONOMIC GROWTH, RECORD FDI,
AND HIGH INFLATION
HANOI 00000037 001.2 OF 002
UNCLAS SECTION 01 OF 02 HANOI 000037
SENSITIVE
SIPDIS
STATE FOR EAP/MLS MBROWN
SINGAPORE FOR TREASURY
TREASURY FOR SCHUN
USTR FOR DBISBEE
E.O. 12958: N/A
TAGS: EINV ECON VM ETRD
SUBJECT: VIETNAM'S ECONOMY 2008: SLOWER ECONOMIC GROWTH, RECORD FDI,
AND HIGH INFLATION
HANOI 00000037 001.2 OF 002
1. (U) Summary: Vietnam's Gross Domestic Product (GDP) growth
slowed to 6.2 percent in 2008, the lowest since 2000. Inflation
rose sharply, with the 2008 average monthly Consumer Price Index
(CPI) rising 23 percent compared to the 2007 monthly average, though
price rises slowed toward the end of the year. Exports remained
strong at USD 62.9 billion, up 29.5 percent from 2007. Imports,
however, continued to surpass exports at USD 80.4 billion, which
resulted in a record trade deficit of USD 17.5 billion. End
Summary.
LOWEST GROWTH RATE SINCE 2000
--------------
2. (U) The General Statistics Office (GSO) of Vietnam released its
2008 economic figures last week. The numbers showed the early
impact of the global economic downturn on Vietnam's economy.
Vietnam's GDP growth rate slowed to 6.2 percent in 2008 from last
year's 8.5 percent. This rate is the lowest since 2000 and falls
below Vietnam's target of 7 percent. Total GDP was VND 1,478,695
billion, or approximately USD 88 billion.
SERVICES SECTOR LEADS GDP GROWTH
--------------
3. (U) The services sector grew 7.2 percent, lower than the 8.7
percent growth in 2007, but for the first time, was the biggest
contributor (2.9 percentage points, or almost half of Vietnam's
overall 6.2 percent GDP growth rate). In years prior, industry and
construction have been the lead contributors to GDP growth. Within
the services sector, the collective group of transportation, post
and telecommunications, and tourism services showed the highest
growth, up 13.8 percent compared to 10.4 percent last year. Other
service sectors reported lower growth rates, including hotels and
restaurants (up 8.5 percent in 2008 versus 12.7 percent in 2007),
and banking, insurance and financial services (up 6.6 percent
compared to 8.8 percent last year).
4. (U) Growth in the industry and construction sectors slowed to 6.3
percent from 10.6 percent last year, contributing 2.6 percentage
points to the overall GDP growth rate. This was mainly due to a 3.8
percent decrease in extraction industries (mostly crude oil).
Private sector growth in this sector (the only sector where GSO
measures private versus public activity) slowed to 18.8 percent,
down from 21 percent in 2007, but continued to be the growth driver.
In contrast, the state sector remained the slower performer with
only 4 percent growth this year compared with 10.3 percent last
year. In value terms, foreign invested enterprises (FIEs) grew 18.6
percent and accounted for 40 percent of total industrial output.
5. (U) The agriculture, forestry, and fishery sectors achieved
growth of 3.8 percent in 2008, up from 3.4 percent in 2007, thereby
contributing 0.7 percentage points to GDP growth. This was largely
attributable to successful rice crops. Total rice outputs increased
by 2.7 million tons (7.5 percent) over 2007, the largest increase in
the last decade. Rice cultivation area expanded by over 200,000
hectares and rice productivity rose by 0.23 tons per hectare.
FOREIGN DIRECT INVESTMENT COMMITMENTS INCREASE
-------------- -
6. (U) In 2008 Vietnam attracted the highest level of FDI
commitments since opening its economy in 1987, with USD 60.3 billion
in new registered capital, 3.4 times higher than that of 2007 (USD
17.8 billion). (Note: Actual FDI disbursements may be considerably
less than registered FDI.) In addition, USD 3.7 billion was added
to 311 existing projects, making up a total of USD 64 billion new
and additional FDI committed to Vietnam in 2008. FDI disbursement
also increased with USD 11.5 billion actually implemented, a 43.2
percent increase over the 2007 level of USD 8 billion but still only
18 percent of committed FDI levels.
7. (U) Foreign Invested Enterprises (FIEs) posted total revenue of
USD 50.5 billion, up 24.4 percent year-on-year, and earned USD 24.5
billion from exports (up 23.7 percent from 2007). This accounted
for 40 percent of Vietnam's total exports (see below). FIEs paid
USD 1.9 billion in taxes, a 25.8 percent increase over 2007. FIEs
also created 200,000 new jobs in the domestic labor market.
HANOI 00000037 002.2 OF 002
DOMESTIC CONSUMPTION SLOWS
--------------
8. (U) Total retail sales and services revenue, about USD 57
billion, rose 31 percent over the 2007 level, mainly due to high
consumer prices. Net retail sales revenue went up by only 6.5
percent in 2008. (Note: Despite numerous sales and promotion
campaigns launched before Tet, Vietnam's busiest retail season,
retail sales reportedly remain slow in early 2009.)
EXPORTS START DECLINE, TRADE DEFICIT HIGH
--------------
9. (U) Vietnam earned USD 62.9 billion from exports, up 29.5 percent
over 2007. Higher world commodity prices were an important
contributing factor. For example, crude oil, Vietnam's largest
export, was down 7.7 percent in volume but up 23.1 percent in value
thanks to higher export prices in the middle of the year. The
United States remains Vietnam's largest export market, buying USD
11.6 billion in goods, up 14.5 percent from 2007 and accounting for
18 percent of Vietnam's total exports in 2008. Due to sluggish
overseas demand, Vietnam's overall exports started falling by
mid-year, from USD 6.5 billion in July, to USD 6.1 billion in
August, USD 5.8 billion in September, USD 5.1 billion in October,
and USD 4.2 billion in November. In December, exports recovered
slightly to USD 4.9 billion due to higher export volume of crude
oil, rice and apparel.
10. (U) Vietnam's imports rose by 28.3 percent to USD 80.4 billion
in 2008. Imports slowed starting in August but continued to outpace
exports. Vietnam had a very large trade deficit of USD 17.5 billion
in 2008, equivalent to approximately 20 percent of its GDP (up from
17 percent in 2007).
INFLATION HIGH BUT UNDER CONTROL
--------------
11. (U) The average monthly consumer price index (CPI) increased by
23 percent in 2008 compared to the monthly average CPI of 2007, the
largest increase in the last ten years. Average prices of all goods
and services in the price basket went up, but food (up 49 percent)
was the major driver of increasing CPI, followed by average prices
for houses and building materials (up 20.5 percent). Average prices
of other goods and services rose by 4.2 to 16 percent.
12. (U) The GOV's tightened monetary policy and its 8 step plan to
fight inflation began to take effect late in the year. The CPI fell
by 0.2 percent compared to the previous month in October, 0.8
percent in November and 0.7 percent in December. With the world
commodities prices forecasted to decline, the GVN predicts that
inflation will fall below 10 percent in 2009.
13. (U) Comment: Vietnam has clearly begun to feel the effects of
the global economic downturn. The GVN will have to continue to
closely monitor the balance of trade, as exports will likely
continue to fall in 2009. A large trade deficit coupled with slow
FDI disbursement could put pressure on the country's external
account. End comment.
14. This cable was coordinated with ConGen HCMC.
MICHALAK
SENSITIVE
SIPDIS
STATE FOR EAP/MLS MBROWN
SINGAPORE FOR TREASURY
TREASURY FOR SCHUN
USTR FOR DBISBEE
E.O. 12958: N/A
TAGS: EINV ECON VM ETRD
SUBJECT: VIETNAM'S ECONOMY 2008: SLOWER ECONOMIC GROWTH, RECORD FDI,
AND HIGH INFLATION
HANOI 00000037 001.2 OF 002
1. (U) Summary: Vietnam's Gross Domestic Product (GDP) growth
slowed to 6.2 percent in 2008, the lowest since 2000. Inflation
rose sharply, with the 2008 average monthly Consumer Price Index
(CPI) rising 23 percent compared to the 2007 monthly average, though
price rises slowed toward the end of the year. Exports remained
strong at USD 62.9 billion, up 29.5 percent from 2007. Imports,
however, continued to surpass exports at USD 80.4 billion, which
resulted in a record trade deficit of USD 17.5 billion. End
Summary.
LOWEST GROWTH RATE SINCE 2000
--------------
2. (U) The General Statistics Office (GSO) of Vietnam released its
2008 economic figures last week. The numbers showed the early
impact of the global economic downturn on Vietnam's economy.
Vietnam's GDP growth rate slowed to 6.2 percent in 2008 from last
year's 8.5 percent. This rate is the lowest since 2000 and falls
below Vietnam's target of 7 percent. Total GDP was VND 1,478,695
billion, or approximately USD 88 billion.
SERVICES SECTOR LEADS GDP GROWTH
--------------
3. (U) The services sector grew 7.2 percent, lower than the 8.7
percent growth in 2007, but for the first time, was the biggest
contributor (2.9 percentage points, or almost half of Vietnam's
overall 6.2 percent GDP growth rate). In years prior, industry and
construction have been the lead contributors to GDP growth. Within
the services sector, the collective group of transportation, post
and telecommunications, and tourism services showed the highest
growth, up 13.8 percent compared to 10.4 percent last year. Other
service sectors reported lower growth rates, including hotels and
restaurants (up 8.5 percent in 2008 versus 12.7 percent in 2007),
and banking, insurance and financial services (up 6.6 percent
compared to 8.8 percent last year).
4. (U) Growth in the industry and construction sectors slowed to 6.3
percent from 10.6 percent last year, contributing 2.6 percentage
points to the overall GDP growth rate. This was mainly due to a 3.8
percent decrease in extraction industries (mostly crude oil).
Private sector growth in this sector (the only sector where GSO
measures private versus public activity) slowed to 18.8 percent,
down from 21 percent in 2007, but continued to be the growth driver.
In contrast, the state sector remained the slower performer with
only 4 percent growth this year compared with 10.3 percent last
year. In value terms, foreign invested enterprises (FIEs) grew 18.6
percent and accounted for 40 percent of total industrial output.
5. (U) The agriculture, forestry, and fishery sectors achieved
growth of 3.8 percent in 2008, up from 3.4 percent in 2007, thereby
contributing 0.7 percentage points to GDP growth. This was largely
attributable to successful rice crops. Total rice outputs increased
by 2.7 million tons (7.5 percent) over 2007, the largest increase in
the last decade. Rice cultivation area expanded by over 200,000
hectares and rice productivity rose by 0.23 tons per hectare.
FOREIGN DIRECT INVESTMENT COMMITMENTS INCREASE
-------------- -
6. (U) In 2008 Vietnam attracted the highest level of FDI
commitments since opening its economy in 1987, with USD 60.3 billion
in new registered capital, 3.4 times higher than that of 2007 (USD
17.8 billion). (Note: Actual FDI disbursements may be considerably
less than registered FDI.) In addition, USD 3.7 billion was added
to 311 existing projects, making up a total of USD 64 billion new
and additional FDI committed to Vietnam in 2008. FDI disbursement
also increased with USD 11.5 billion actually implemented, a 43.2
percent increase over the 2007 level of USD 8 billion but still only
18 percent of committed FDI levels.
7. (U) Foreign Invested Enterprises (FIEs) posted total revenue of
USD 50.5 billion, up 24.4 percent year-on-year, and earned USD 24.5
billion from exports (up 23.7 percent from 2007). This accounted
for 40 percent of Vietnam's total exports (see below). FIEs paid
USD 1.9 billion in taxes, a 25.8 percent increase over 2007. FIEs
also created 200,000 new jobs in the domestic labor market.
HANOI 00000037 002.2 OF 002
DOMESTIC CONSUMPTION SLOWS
--------------
8. (U) Total retail sales and services revenue, about USD 57
billion, rose 31 percent over the 2007 level, mainly due to high
consumer prices. Net retail sales revenue went up by only 6.5
percent in 2008. (Note: Despite numerous sales and promotion
campaigns launched before Tet, Vietnam's busiest retail season,
retail sales reportedly remain slow in early 2009.)
EXPORTS START DECLINE, TRADE DEFICIT HIGH
--------------
9. (U) Vietnam earned USD 62.9 billion from exports, up 29.5 percent
over 2007. Higher world commodity prices were an important
contributing factor. For example, crude oil, Vietnam's largest
export, was down 7.7 percent in volume but up 23.1 percent in value
thanks to higher export prices in the middle of the year. The
United States remains Vietnam's largest export market, buying USD
11.6 billion in goods, up 14.5 percent from 2007 and accounting for
18 percent of Vietnam's total exports in 2008. Due to sluggish
overseas demand, Vietnam's overall exports started falling by
mid-year, from USD 6.5 billion in July, to USD 6.1 billion in
August, USD 5.8 billion in September, USD 5.1 billion in October,
and USD 4.2 billion in November. In December, exports recovered
slightly to USD 4.9 billion due to higher export volume of crude
oil, rice and apparel.
10. (U) Vietnam's imports rose by 28.3 percent to USD 80.4 billion
in 2008. Imports slowed starting in August but continued to outpace
exports. Vietnam had a very large trade deficit of USD 17.5 billion
in 2008, equivalent to approximately 20 percent of its GDP (up from
17 percent in 2007).
INFLATION HIGH BUT UNDER CONTROL
--------------
11. (U) The average monthly consumer price index (CPI) increased by
23 percent in 2008 compared to the monthly average CPI of 2007, the
largest increase in the last ten years. Average prices of all goods
and services in the price basket went up, but food (up 49 percent)
was the major driver of increasing CPI, followed by average prices
for houses and building materials (up 20.5 percent). Average prices
of other goods and services rose by 4.2 to 16 percent.
12. (U) The GOV's tightened monetary policy and its 8 step plan to
fight inflation began to take effect late in the year. The CPI fell
by 0.2 percent compared to the previous month in October, 0.8
percent in November and 0.7 percent in December. With the world
commodities prices forecasted to decline, the GVN predicts that
inflation will fall below 10 percent in 2009.
13. (U) Comment: Vietnam has clearly begun to feel the effects of
the global economic downturn. The GVN will have to continue to
closely monitor the balance of trade, as exports will likely
continue to fall in 2009. A large trade deficit coupled with slow
FDI disbursement could put pressure on the country's external
account. End comment.
14. This cable was coordinated with ConGen HCMC.
MICHALAK