Looking back at Vietnam’s economy in 2015, the outlook was generally good, especially when compared with other countries in the region.
"Clearly growth slow-down of neighboring countries did not affect Vietnam and we have also seen the recovery out of global financial crisis", Ms. Kwakwa pointed out. Many industries such as construction, manufacture performed well, even in agriculture in terms of volume, fueled by strong domestic demand.
Of all other ASEAN countries, Vietnam was the only country with growth rate at 6.7% thanks to private consumption and foreign investment.
Vietnam stood out in terms of recovery compared to other countries in the region thanks to exceptional export performance.
However, the recovery was driven mainly by the FDI sector that used labor intensive manufacturing. Vietnam also had high import content but low domestic value added.
In terms of resilience, the World Bank recognized record-low inflation and relatively stable exchange rate amid volatile international markets. Vietnam was also the best performing stock market in Asia when pit against China, Indonesia, Malaysia, Philippines and Thailand.
Speaking of reforms, Ms. Kwakwa believed reforms had been a steady but uneven process in Vietnam.
Specifically, macroeconomic policy response to market activities had been overall very positive, highlighted by increased exchange rate flexibility and resumed credit growth.
Counter-cyclical fiscal policy supported the economy but resulted in imbalances and rising public debt.
Reforms in structural policies remained a steady but slow process on the equitization of state-own enterprises. There has been some progress on banking sector consolidation but yet to address deep-rooted vulnerabilities.
Ms. Kwakwa expected recovery to sustain and inflation remains low. However, global risks remains elevated (from monetary policies in US and eurozone, slow-down and rebalancing in China).
Vietnam’s economy is still vulnerable due to limited shock buffers, large fiscal deficit, high debt, low reserves and unresolved non-performing loans.
“As a result, Vietnam needs to solidify macroeconomic stability and economic buffers, focus on fiscal consolidation for public finances and push structural reforms to raise growth potential in 2016 and beyond”, Ms. Kwakwa highlighted.