growth is forecast to improve from 6.21% in 2016 to reach 6.3% in 2017 and pick up to 6.4% in the next two years thanks to strong foreign direct investment (FDI
), robust domestic demand and export-oriented manufacturing, the World Bank
(WB) has said in a report.
In the East Asia – Pacific region (excluding China), Vietnam’s 2017 growth forecast comes fourth after Laos (7.0%), the Philippines (6.9%), and Myanmar (6.9%).
Inflation pressures overall are expected to remain moderate thanks to subdued commodity and energy prices globally, the bank adds.
“Despite a slight slowdown in the first quarter (Q1), Vietnam’s macroeconomic fundamentals remain strong, said Ousmane Dione, WB Country Director for Vietnam said at a press meeting on April 13 in response to BizLIVE’s question.
The WB representative, however, pointed out that productivity in the agricultural sector remains low as the impact of the decades-worst drought persists.
According to Sebastian Eckardt, WB lead economist in Vietnam, manufacturing, services and retail sales will remain robust and drive economic growth. The bank, therefore, has not revised down its growth forecast for this year.
The WB report notes that credit growth is still elevated although policy rates have remained unchanged. Credit growth reached about 19% y-o-y in December 2016.
“This rapid expansion of credit –more than twice the growth rate of nominal GDP - provides some cause for concern, particularly since Vietnam’s credit-to-GDP ratio – about 120% in December 2016 - is already high and the overhang of past non-performing loans has not been fully resolved.”
Eckardt also raised concerns about the directions of credit and warned against credit for speculative sectors such as finance and real estate, which could lead to asset bubble and deterioration of asset quality.