March 27 (Bloomberg) -- Vietnam’s growth slowed in the first quarter, putting pressure on the government to revive bank lending in an economy hobbled by bad debt.
Gross domestic product expanded 4.89 percent in the first three months of the year from the same period a year earlier, the General Statistics Office said in Hanoi today. That compares with a previously reported 5.44 percent pace in the last quarter of 2012 and the median estimate of 5.2 percent in a Bloomberg survey of 10 economists. Growth in the first quarter of 2012 was revised to 4.75 percent, the Statistics Office said.
Prime Minister Nguyen Tan Dung in February approved a master plan to revamp the economy after a credit slump damped corporate expansion and consumer spending, while a weak property market hurt construction. Vietnamese bank lending contracted in the first two months after growing 9 percent last year, which was the slowest pace in at least two decades.
“The State Bank of Vietnam has been loosening monetary policy and there’s plenty of liquidity, but it’s not clear how this can adequately revive economic activity in the absence of a functioning banking system,” Johanna Chua, the Hong Kong-based head of Asian economic research at Citigroup Inc., said before the report. “It will be difficult to sustain much of a domestic recovery when bank lending is still so weak.”
The monetary authority this week cut its policy interest rates, the seventh such reduction since the start of 2012, after inflation slowed to 6.64 percent in March. The refinancing rate is now 8 percent compared with 15 percent at the end of 2011.
The benchmark VN Index rose 0.5 percent as of the mid-day break in trading as Asian shares climbed on U.S. economic data. The Vietnamese dong gained 0.1 percent to 20,935 per dollar.
Vietnam’s economy grew 5.03 percent last year, the slowest pace since 1999, and the World Bank predicts expansion of 5.5 percent this year. That would mark the first time in at least two decades that the nation expanded less than 6 percent for three straight years.
Retail sales increased 11.7 percent in the first quarter from the same period a year earlier, slowing from a 21.8 percent pace in the same period a year earlier, the Statistics Office also said today. The struggling economy and labor market cut into purchasing power, the agency said in a summary.
Dung has appointed Deputy Prime Minister Vu Van Ninh and central bank Governor Nguyen Van Binh to oversee a panel to restructure banks by 2015. An asset management company will be set up by the end of this month to resolve bad debt, according to Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council.
A local unit of Malaysia’s Berjaya Land Bhd. is seeking to reduce the scale of a proposed financial center in Ho Chi Minh City, citing “tough conditions” in the property market, the Saigon Times Daily reported this month. Industry and construction, which made up 40 percent of Vietnam’s economy, expanded 4.93 percent in the first quarter, compared with 5.15 percent in the same period a year earlier, today’s report showed.
Services, which accounted for 47 percent of GDP, grew 5.65 percent. Agriculture, fisheries and forestry, which made up 13 percent of GDP, expanded 2.24 percent, the report showed.
“There are no signs yet that there’s a recovery in our industry,” said Alan Young, chief operating officer of Australia’s Vietnam Industrial Investments Ltd., which operates steel plants. “We’re hopeful that there may be some improvement later in the year, but we’re not seeing it yet.”
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