ADB Trims Vietnam’s 2017 GDP Growth Forecast to 6.3%

Minh Anh

09:55 27/09/2017

BizLIVE - Besides slashing Vietnam’s economic growth projections, ADB warned of several challenges that the country needs to address.

ADB Trims Vietnam’s 2017 GDP Growth Forecast to 6.3%

ADB Vietnam's officials at the press meeting i in Hanoi on September 26. Photo: ADB

The Asian Development Bank (ADB) has revised down Vietnam’s economic growth forecast by 0.2 percentage points to 6.3% this year, and also warned of risks from the government’s plan to boost credit growth to the local economy.
The downward revision was made due to an 8% contraction in mining and oil output in the first half of the year, according to the bank’s Asian Development Outlook Update 2017.
The bank also reduced the Southeast Asian country’s GDP growth forecast for 2018 to 6.5% from the previous 6.7%.
“Despite the drop in mining and oil output, Vietnam’s economy continues to perform well, driven by its twin engines of export-orientated manufacturing and rising domestic consumption”, said Eric Sidgwick, ADB country director for Vietnam.
“Manufacturing expanded by 10.5% in the first half of the year as new foreign-invested factories ramped up production, while the services sector continued to pick up steam as a result of rising retail trade, growing bank lending and a 30% jump in tourism arrivals,” he added.
Vietnam’s economic growth is expected to rise in the second half of the year, buoyed by further increases in foreign direct investment and exports, domestic credit growth, a further recovery in agriculture from the 2016 drought and accelerating disbursements of capital expenditure on national infrastructure programs, the bank noted in the semiannual report.  
The report pointed out several issues that Vietnam will need to be address to ensure sustainable growth.
Recent efforts to raise already strong bank lending growth by lowering interest rates to historical lows have the potential to increase financial sector risks, particularly given the large stock of past unresolved bad debts.
“To ensure these risks are well managed it will be vital to strengthen regulations and supervision on loan quality and to continue the introduction of more stringent, Basel II, regulatory standards over the next 12-18 months,” it said.
Further, while recent progress in trimming the budget deficit is commendable, it has also led to a drop in capital spending which if not rebalanced could erode Vietnam’s long-term growth performance. Therefore, Vietnam’s authorities should focus on adopting additional taxation measures while trimming non-core public expenditures such as administrative expenses which have crowded-out infrastructure in recent years, the bank suggested.  
In addition, though the country’s strong trade performance is expected to continue, it may be exposed to increased risks if a slowdown in major industrial economies occurs or from unexpectedly low growth in China, it warned.

MINH ANH

Từ khóa: ADB, economic growth

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