The new target, down from a previous figure of as high as 9 percent, would be presented to the National Assembly for approval, Deputy Prime Minister Nguyen Sinh Hung said last week.

The economy expanded at an annual rate of 7.4 percent in the first quarter, compared with 7.8 percent a year earlier, according to the General Statistics Office.

Growth has been crimped this year by accelerating inflation, as higher prices for raw materials and construction materials hamper industrial output.

Subsequent efforts by authorities to tighten monetary policy to reduce the amount of cash in circulation have also hurt growth.

“Inflation is going to be a big challenge, but I don’t see Vietnam’s growth rate falling under 7 percent almost under any circumstances,” Bradley Lalonde, Hanoi-based general director of BIDV-Vietnam Partners Investment Management Joint Venture Co., said at the Alternative Investments IQ Vietnam 2008 conference.

“The government is going to be tightening its spending and money supply to reduce inflation, and that will have a slowdown effect on economic growth,” Lalonde said.

“Maybe a slowdown from the 9 percent forecast to 7 percent could be healthy, given that Vietnam has some infrastructure issues it needs to deal with.”

Less pressure

Adam McCarty, chief economist of Mekong Economics Ltd. in Hanoi, said measures taken to fight inflation as well as a possible tumble in the country’s property market mean that “2008 will be a tough year” for Vietnam.

“Maybe growth could dip below 7 percent, but probably not,” he told investors.

“It’s good that they’ve reduced the economic growth target, so they’re not under pressure to achieve 9percent, which would have just fed into inflation.”

Prime Minister Nguyen Tan Dung Monday told provincial and municipal leaders in the south of the country to focus on fighting inflation in an attempt to ensure sustainable growth.

The Ministry of Construction has asked local authorities to make a priority list of real estate developments, with an eye to limiting inefficient projects.

Vietnam will still reach a goal of doubling gross domestic product between 2005 and 2010 through average annual growth of 7.5 percent, McCarty said.

The Party’s “doi moi” economic policy had brought the country to the verge of middle-income status, he told investors.

“Vietnam is no longer a miserably poor developing country,” McCarty said.

“It’s no longer in a physical sense an economy in transition from central planning to markets.

The Vietnamese can say that “doi moi” is finished.

“It’s been more than 20 years since it began, and that’s enough. The Party has to think of a new phrase.”

Source: Bloomberg