Illustrative photo (Source: VNA)Hanoi (VNA) –The World Bank (WB) on December 11 released itsreport “Taking Stock- An Update on Vietnam’s Recent Economic Development”,forecasting the country’s GDP to grow at 6.7 percent this year.
Over the medium term, growth is projected to stabilise at around 6.5 percent,and inflation is projected to remain low, says the bi-annual economic report onVietnam.
Ousmane Dione, WB Country Director for Vietnam, said growth momentum picked upacross major economies and global trade recovered in 2017, adding with incomesrising and poverty falling, Vietnam’s economy had another good year of stronggrowth and broad macroeconomic stability.
According the new WB report, stronger domestic demand, robust export-orientedmanufacturing, and a gradual recovery of the agriculture sector are drivingVietnam’s economy, which expanded by 6.4 percent during the first nine monthsof the year compared to the same period last year. The manufacturing andservice sector respectively grew by 12.8 percent and 7.3 percent during thesame period.
Low inflation and rising real wages sustained buoyant domestic demand andprivate consumption, while the stronger global economy helped Vietnam’s export-orientedmanufacturing and agricultural sectors. Job growth continued, with 1.6 millionnew jobs added in the manufacturing sector over the past three years, and700,000 additional jobs in the construction, retail, and hospitality sectors,leading to higher aggregate labour productivity. Labour demand also contributedto rapid wage growth, with wages increasing by 15 percent cumulatively between2014 and 2016.
Despite progress in resolving non-performing loans, risks remain, including thelack of robust capital buffers in some banks, especially amidst rapid creditgrowth.
Fiscaltightening is underway, and has led to a leaner budget deficit and containmentof public debt accumulation. However, the decline in public investment –falling to 16 percent of total spending in the first nine months of 2017compared with an average of 25 percent in recent years – may not be sustainableover time, as Vietnam needs significant investments in infrastructure tosupport future growth.
A slow-down in structural reforms could also impact the ongoing recovery,especially given the weaker growth in investment. Enhancing macroeconomic resilience andstructural reforms can lift Vietnam’s growth potential over the medium term.
Sebastian Eckardt, WB’s Lead Economist for Vietnam, said structural reformremains a central priority in view of tepid productivity growth. Building onprogress already made, Vietnam can further lift productivity growth throughinvestments in needed infrastructure and skills as well as deeper reforms ofthe business environment, SOE and banking sector, the WB expert added.-VNA
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