GDP is estimated to have grown by 8.4 percent in 2005, the highest level in nine years. This strong performance has been accompanied by a continuation of Vietnam's remarkable success in reducing poverty, which by now has declined to under 20 percent. Even though macroeconomic policymaking in 2005 was complicated by supply shocks, external and internal balances were maintained at manageable levels. Rising international commodity prices while benefiting exports and government revenues added to inflationary pressures. Real GDP originating in the industrial sector is estimated to have risen to 10.6 percent in 2005, with the manufacturing sub-sector growing by 13 percent. Construction activity picked up especially in the second half of the year to record an increase of 10.8 percent. Services sector growth strengthened to record 8.5 percent in 2005. The main areas of expansion included retail trade, and sub-sectors related to tourism such as hotels, restaurants and transport. |
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Agricultural production is estimated to have grown by around 4 percent despite the resurgence of avian influenza and drought conditions in parts of the country. It is estimated that in 2005 the direct impact of avian influenza amounted to around 0.1 percent of GDP. While the real impacts of avian influenza outbreaks appear minimal for now, this is an area requiring a high level of vigilance by the authorities. The outbreaks have had non-negligible impacts on inflation in the short-term, as they have resulted in rises in the prices of poultry products, with knock-on effects on prices of substitute meat products. Investment continued to remain strong rising from 38.4 percent of GDP in 2004 to 38.9 percent in 2005, according to MPI data. As in recent years, private sector investment showed rapid expansion. An additional 40,000 new businesses were registered in 2005, representing an increase of 9 percent in number and 45 percent in registered capital. Revised estimates show a steep rise in FDI commitments from 4.2 billion dollars in 2004 to 6.3 billion dollars in 2005. Disbursements, including domestic borrowing by joint ventures, reached 3.3 billion dollars implying an increase of 15 percent over the past year. On the external front, export earnings grew by 22 percent in 2005. Crude oil exports, benefiting from high international prices, rose 30 percent in value terms. Rice exports reached a record of 5 million tons, and with the help of better prices, 1.5 billion dollars in value. The main manufactured export, garments, after being flat in the first half of 2005, recovered in the second half to grow by 10 percent over the whole year. Destination data for 2005 reveals that garment export growth to the United States slowed to 5.2 percent, but experienced growth of over 18 percent in the European Union and Japanese markets. In the first two months of 2005, overall exports have grown at a robust 28 percent y-o-y, with garments growing by 45 percent y-o-y. Compared with the first half of 2005, imports slowed down in the second half. Their growth rate over the entire year stood at 15.4 percent. Part of the slowdown was due to the softening of international commodity prices, which were a key driver of the 25 percent growth rate of imports during 2004. Imports of machinery which had picked up in the first four months of 2005 have since flattened out, showing almost no change compared with 2004. Back to top
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