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Economy

Vietnamese growth slows to 6.21% in 2016

Samsung smartphone debacle, weaker consumer spending take a toll

Vietnam serves as a major production base for South Korea's Samsung Electronics.

HANOI -- Vietnam's real domestic product grew more slowly for the first time in four years in 2016, official figures out Wednesday show.

The reading came to 6.21%, according to the General Statistics Office, slightly missing the 6.3% government projection released around autumn and the 6.7% initial forecast made at the start of the year.

Samsung Electronics' woes with the Galaxy Note 7 smartphone were a big factor. The South Korean company cut production at bases in the northern provinces of Bac Ninh and Thai Nguyen, which account for 30% of its worldwide smartphone output, as news of the fire hazard posed by the device spread. Growth in mobile phone exports from the production bases, including parts, sank by roughly half to 14.4% from the 28% of 2015.

In the industrial and construction sector overall, growth eased from the 9.6% of 2015 to 7.6%. Lower oil prices led to a 4% decline in the resources and mining sector -- the sharpest drop in the past five years. A group member of Taiwan's Formosa Plastics had to halt construction on a large steel plant in the central province of Ha Tinh over environmental concerns. Domestic steel production did not rise as strongly as in the previous year as cheap steel from a slowing China flooded the market.

Consumer spending, accounting for roughly 70% of the Vietnamese economy, also flagged. Total retail sales grew 7.4% to make the worst showing in a decade after enjoying a nine-year streak of double-digit growth. Retail sales jumped 30.8% in 2010.

Consumption by the wealthy held firm, with new-car sales hitting a record 300,000 units. But spending was sluggish among the middle and lower classes. This was due largely to increased anxiety about future, with costs going up in areas including education, utilities, gasoline and traffic tickets. Inflation spiked from the 0.6% of 2015 to 2.7% in 2016.

The dong has been under increased downward pressure since Donald Trump won the American presidential election. Trump's victory has also disappointed the textile, agriculture and fisheries sectors here with the U.S. sure to abandon the Trans-Pacific Partnership, a trade agreement the World Bank has said would benefit Vietnam the most.

But 6%-plus growth remains a respectable achievement matched only by the Philippines and Myanmar in the region. The Vietnamese population of 93 million, with an average age of just 28, also constitutes a highly attractive consumer market. The government has been working to reform state-owned enterprises and relax frequently unclear regulations. Growth may turn up again soon if these efforts lift foreign investment.

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