(Adds reaction, paragraphs 14-18) By John Ruwitch
HANOI, Jan 12 (Reuters) - Vietnam’s ruling communists opened an eight-day party congress on Wednesday with a candid admission the fast-growing economy had become unstable, as delegates began the process of reshuffling leaders and charting new policies.
As leaders sang the national anthem to begin the five-yearly event, streets in the chilly capital Hanoi were festooned with red and yellow banners, some bearing the iconic hammer and sickle. Propaganda posters bore the smiling likeness of revolutionary leader Ho Chi Minh or of proud, uniformed workers.
The economic backdrop is less festive. Inflation surged to a 22-month high in December, the government is struggling to bring down a hefty fiscal deficit, the currency has been depreciating for three years and the trade deficit remains stubbornly high.
Outgoing Communist Party chief Nong Duc Manh told the 11th Party Congress that “macro balances are unstable” in the country of nearly 90 million people as he outlined achievements and challenges for the next five years.
In an hour-long speech, Manh said the economic growth target for the 2011-15 period would be 7.0-7.5 percent a year. September drafts of documents for the congress to consider had a stronger five-year target at 7.5-8.0 percent.
Manh said the GDP growth target for the 10-year period to 2020 was 7-8 percent.
“The coming years are a period in which the economy of our country will recover, returning to fast growth after a period of slowdown, and (we will) restructure the economy for fast and sustainable development,” he said.
Economists say the leadership appeared too focused last year on economic growth, which reached 6.8 percent, leading to a resurgence of inflation, which kept pressure on the currency.
The central bank devalued the dong twice last year, and since October it has been trading against the dollar on the unofficial market well below the lower end of its band.
All three major ratings agencies downgraded Vietnam last year on macroeconomic concerns exacerbated by the questions surrounding the troubles at near-bankrupt state shipbuilder Vinashin. The case has sparked debate in the fast-changing country about the favoured role of the state sector.
The congress is not expected to decide on specific policies, but delegate Vu Tien Loc, who is head of the state-backed Vietnam Chamber of Commerce and Industry, said he hoped to discuss much-needed economic restructuring.
“In the coming five years there will be many challenges for the Vietnamese economy, and it will be a period in which we will need to have more resolve in the task of pushing changes in the structure of the economy,” he said.
“We hope the focus of discussion on economic problems will be how to speed up the process of transforming the structure of the economy to raise efficiency and competitiveness of the economy.” On Hanoi’s streets, people were more concerned about bread-and-butter issues than congress and pending leadership changes. Nguyen Thuy Lan, 42, who runs a tiny shop selling motorcycle helmets, complained about inflation, taxes and food safety and said she hoped there would be changes but was not optimistic. “There’ve been lots of party congresses over the years. Sure, things are more open, but there are still problems,” she said. Down the street, Nguyen Dac Luan, 38, who repairs mobile phones, said he read congress-related news but not intently. “I don’t really follow politics,” he said. Asked if he thought the congress would mean much for policies or the economy, he said no. Manh will be replaced at the congress, a party official confirmed on Monday. But it remains unclear exactly who the next party chief will be.
Party sources and analysts have said Prime Minister Nguyen Tan Dung may be returned for a second term, while the current head of parliament, Nguyen Phu Trong, could become general secretary.
Truong Tan Sang, a southerner who currently runs day-to-day affairs of the party and a rival of Dung‘s, is tipped for the relatively weak post of state president.
Regardless of the personnel changes at the pinnacle of the party and government, few analysts foresee major policy changes. (Additional reporting by Nguyen Van Vinh and Nguyen Huy Kham. Editing by Jason Szep and Andrew Marshall)