Vietnam Sees Second-Quarter Growth

June 29, 2011 (Wall Street Journal; June 29, 2011) -- HANOI—Vietnam's economic growth sped up slightly in the second quarter, but remained restrained amid government efforts to rebalance the economy and rein in inflation.

Gross domestic product expanded 5.7% year-to-year in the second quarter of 2011, the General Statistics Office said in a statement. The economy grew 5.6% in the first half of the year.

The second-quarter growth was slightly faster than the 5.4% increase in the January-March period, thanks to higher industrial and construction output, but significantly slower than the 7.3% expansion posted in the final quarter of 2010. Vietnam's economy expanded 6.8% last year.

"I think after the government admitted itself that [full-year] growth can be around 6%, it's probably signaling that it's putting stability in front of growth," said Santitarn Sathirathai, an economist with Credit Suisse, who had expected the second-quarter growth figure to be 5.8%.

In February, Vietnam's government announced a major policy switch as what was once one of the most promising developing economies spun out of control, resulting in rising inflation, an entrenched trade deficit and a battered local currency—which has been devalued several times in the past year and a half.

Authorities have pledged to keep credit growth below 20% this year, cap the budget deficit at 5% of GDP, boost domestic production and curb the trade deficit. The central bank has raised benchmark interest rates several times this year.

The government this month cut its 2011 GDP target to 6% growth from 6.5%, and lifted its inflation forecast to 15% from 11.75%. It was the second time this year the government lowered its growth forecast and raised its inflation outlook.

The consumer price index rose 20.8% year-to-year in June, up from May's 19.8%, with some economists predicting that inflation won't peak until August or September.

Though the government has taken steps to tighten lending in the first half, Vietnam will continue to face high inflation in the third quarter, and more anti-inflationary efforts should be taken in coming months, says economist Vuong Quan Hoang of Hanoi-based DHVP Research & Consultancy.

"As June CPI rose 20.82% on year and it's thought that it will rise further in July; it's very difficult for the government to pull it back to 15% or even below 10% any time soon," Mr. Hoang said.

--Leigh Murray in Bangkok contributed to this article.

Write to Nguyen Pham Muoi at phammuoi.nguyen@dowjones.com