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Vietnam economy grows by 5.18% in first half of 2014

Vietnam's economic growth picked up in the first half of the year, official figures showed Friday, indicating the effects of anti-Chinese riots were not as bad as feared.

HANOI: Vietnam's economic growth picked up in the first half of the year, official figures showed Friday, indicating the effects of anti-Chinese riots were not as bad as feared.

Gross domestic product (GDP) expanded 5.18 per cent in January-June from the same period last year, according to General Statistics Office estimates, up from 4.9 per cent in the same period last year.

The central bank last week devalued the Vietnamese dong by one per cent to help boost exports following unrest in May triggered by the protests.

The country was hit by deadly riots in May after China moved an oil rig into waters claimed by Vietnam, inflaming already tetchy relations between the neighbours.

However, Taiwanese and Korean businesses were hit hardest by the violence, which saw factories vandalised and set ablaze in parts of south and central Vietnam.

Hanoi has offered compensation to affected businesses by cutting tariffs and fast-tracking insurance settlements.

"The quickness with which they responded was striking," Sudhir Shetty, a World Bank East Asia expert, told AFP, adding authorities had managed "to insulate the economic from the political".

While the riots damaged the country's reputation as a solid bet for foreign investors, Shetty said "in relative terms Vietnam is still pretty stable".

But he warned there were longer term challenges to address. Among those are sluggish domestic demand, a banking sector weighed down with high levels of toxic debt and record numbers of bankruptcies.

"The crisis in Vietnam's banking sector is continuing to hold back the economy," according to a briefing note issued by analysts Capital Economics.

"With the authorities making slow progress in cleaning up the banks, we expect the woes of the financial sector to continue to weigh heavily on the economy for the next couple of years."

Other agencies are more bullish on Vietnam's future.

On Thursday, Standard & Poor's affirmed its 'BB-' long-term and 'B' short-term sovereign credit ratings on Vietnam, saying the long-term outlook was "stable".

"Vietnam's growth potential is robust, given an export manufacturing sector that is well-diversified and increasingly oriented toward higher value-added goods, a rising share of services and manufacturing in economic output, and the growth of the private sector," S&P said in a statement.

Prime Minister Nguyen Tan Dung said this month the country was targeting GDP growth of around 5.8 per cent this year, followed by 6.0 per cent in 2015 and 6.5 per cent a year for the following four years.

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