Lower cost base lifting FDI inflow: stimulus and a depreciated currency carried Vietnam through the global financial crisis, but observers see weaknesses in infrastructure and skills, and some worry that if the economy comes under pressure, it could open the door for China to extend its economic influence ...(VIETNAM: BALANCING GROWTH, INFLATION)

[ILLUSTRATION OMITTED]

HANOI -- Vietnam's economy is on a roll. Economic growth, dented during the global economic downturn, is again heading to higher rates, with Vietnam's Communist Party setting a target of 8.0 per cent over the next five years.

The Ministry of Planning and Investment (MPI), in an upbeat mood, has forecast a growth rate of 7.0 to 7.5 per cent for 2011--from levels close to 6.5 per cent in 2010.

Vietnam successfully weathered the global recession, largely thanks to an US$8.5 billion stimulus package, interest subsidy schemes and a depreciated currency--the dong was twice reduced in value to drive exports.

The Asian Development Bank's Country Director for Vietnam, Ayumi Konishi, says the stimulus package kept growth going. "The economy is coming back. Some of the factories which had laid off people are getting them back to work," Konishi says. "Because of the stimulus package, consumption has been relatively active." Danny Armstrong, General Director of Australia's Commonwealth Bank in Vietnam, agrees that Vietnam's economy has, like many Asian nations, recovered well from the global financial crisis.

Armstrong is upbeat. "If you consider we've just come through the worst global financial circumstances in 80 years, the Vietnamese economy last year grew at 5.3 per cent when most …