The World Bank
(WB) has retained its 2016 economic growth
forecast for Vietnam at 6.0%, lower than the government’s revised target of 6.3%-6.5%, while urging faster implementation of structural reforms to boost productivity.
The bank in July trimmed Vietnam’s growth projection to 6.0% from 6.3% announced at the end of 2015, due to a decline of agricultural output and a slowdown of external trade.
“Amidst slower global growth, Vietnam’s economy has proven resilient. Economic activity in Vietnam moderated somewhat in the first three quarters of 2016, due to the impact of a severe drought on agricultural production and slower industrial growth.
But macroeconomic stability has been maintained and inflationary pressures remain subdued,” the bank said in its East Asia and Pacific Update released Wednesday.
Sebastian Eckardt (M), program leader of the World Bank Vietnam, answers questions at the launch of the East Asia and Pacific Update in Hanoi on Oct. 5. Photo: Minh Tuan/BizLIVe
“Despite the fact that [economic] growth is slightly lower than last year and below the government’s target, in our view, growth is still very resilient in Vietnam and growth performance remains robust,” said Sebastian Eckardt, program leader of the World Bank Vietnam.
“In our assessment, it’s more important to focus on sustainability and quality of growth, rather than achieving growth targets by measures that are not sustainable,” he added.
The report notes that accumulated fiscal imbalances remain a cause of concern. A fiscal deficit of about 6% of GDP in 2015 pushed Vietnam’s public debt to an estimated 62.2% of GDP, nearly 11 percentage points higher than in 2010 and inching quickly toward the legally-mandated ceiling of 65% of GDP.
Fiscal outturns in the first half of 2016 suggest that budget pressures persist, as lower oil prices and weaker economic activity weigh on revenue performance. The country’s debt is projected to reach 64.1% of GDP in 2016, 64.7% in 2017 and 64.9% in 2018.
The World Bank points out major risks to the Vietnamese economy. A further weakening of external markets could dim Vietnam’s export performance.
On the domestic front, slow progress in implementing structural reforms to boost productivity could dampen medium-term growth, while delays in addressing lingering non-performing loan problems and fiscal consolidation could pose risks to future macroeconomic stability and growth, says the report.