The Pace of Vietnam’s Growth Quickens to 7.3 Percent in Q4

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Dec. 30 – Typically, blistering fast growth rates are a boon for any economy. But Vietnam’s above-the-mark growth rate of 7.3 percent in Q4 only strengthened fears of overheating.

Gross domestic product grew 7.34 percent in the three months through December from a year earlier, while annual GDP rose by 6.83 percent for 2010.

Fears of loan defaults abound as Vietnam experienced a 27.7 percent jump in lending, driving inflation to a record two-year high. The Vietnamese dong has been devalued three times in the past 13 months. Moody’s Investor’s Service and Standard & Poor’s cut the nation’s credit ratings in December, and Vinashin, the country’s biggest shipbuilder, is struggling to pay debts owed to international lenders.

“Credit growth needs to be brought down to about 20 percent,” Jim Walker, an economist at Asianomics Ltd. in Hong Kong, told Bloomberg News.

Vietnam’s growth spurred imports and contributed to a trade deficit of US$12.4 billion. The dong was devalued in August to curb the trade gap.

“We suspect that the government fairly soon will compromise on its growth target,” said Kevin Grice, a London-based economist for Capital Economics.

Industry and construction, accounting for 41 percent of the economy in 2010, expanded 7.7 percent today’s report showed.

The service sector accounted for 38 percent of the economy, and grew by 7.52 percent. Agriculture, forestry and fisheries, which make up 21 percent of gross domestic product, expanded at a rate of 2.78 percent.