The Southeast Asian country's trade deficit and inflation have hit multi-year highs this year due to soaring costs of energy and food and Vietnam badly needs foreign investment to offset the trade gap on its balance of payments.

"The FDI result is an indication of our improved investment environment and the country's growth prospects," prime minister Nguyen Tan Dung said in a televised speech at the opening of a session of the National Assembly, the country's top legislative body.

This year foreign investment pledges would reach a record US$60 billion, Dung said.

Foreign direct investment has been the emerging economy's main source of funds to offset this year's trade deficit, estimated at an all-time high of US$19 billion.

Dung said there would be a current account surplus of US$2.7 billion this year and reiterated the government's targets for 2009 of 7% economic growth and bringing down inflation to 15% from this year's levels above 20%. "Our top priority remains the control of inflation and macroeconomic stability."

"The global financial crisis is expected to have a negative impact on Vietnam's economy next year," he added.

He said exports would rise 18% to US$76.7 billion but the trade deficit in 2009 would widen to around US$20.7 billion, from an estimated US$19 billion this year.

The forecast export growth for 2009 is slower than the pace of 30% expected this year and 22% last year.

The ballooning trade deficit and high inflation have forced the authorities to tighten monetary policy and curb public investments prompting a cut in the 2008 economic growth target to 6.5-7% from 8.5-9%.

Analysts expect lower world prices of crude oil, which is Vietnam's top cash earner with revenue of nearly US$9 billion in the first nine months of 2008, to push down growth in exports in value terms.

Demand for other top exports such as garments and textiles was also expected to be affected by the global financial turmoil which is hitting Vietnam's biggest export markets, including the United States, the European Union and Japan.

Reuters - October 18, 2008