The Hanoitimes - Vietnam`s GDP is projected to expand by 6.8% in 2018, up from the previous estimate of 6.5%, while challenges remain to maintain the growth momentum, according to the World Bank`s latest report titled Taking Stock.
Positive prospects in a foreseeable future
Vietnam's economic prospect remains robust and is accompanied by broad macroeconomic stability, assessed the report.
Real GDP is projected to expand by 6.8% this year, up from 6.5% in the previous forecast before moderating to 6.6% in 2019 and 6.5% in 2020, due to an expected slowdown in global demand.
World Bank's representatives at the launch of Taking Stock, the latest economic update for Vietnam. Photo: Ngoc Thuy
"Vietnam's high economic growth in 2017 and in the first quarter of 2018 is impressive and gives the country a firm foundation to move forward," said Ousmane Dione, the World Bank Country Director for Vietnam at the launch of in June 14.
Additionally, recent growth was driven by a cyclical increase in global demand as well as a recovery in investment from FDI and private sector, and an ongoing shift of labor away from agriculture into more productive manufacturing and service sectors.
Vietnam's trade balance continued to improve owing to strong trade performance and FDI inflows, contributing to the overall current account surplus, estimated at 6.8% of GDP in the first quarter. The exchange rate has been relatively stable while reserves continued to rise, reaching about US$63 billion in the first 4 months of 2018, equal to around 3.6 months of imports.
Public debt has stabilized since 2017, with an overall fiscal deficit of 4.5% of GDP, and the public-debt-to-GDP ratio declined to 61.4% in 2017 from 63.6% in 2016.
The report noted that inflation is expected to remain around the government target of 4%. The current account balance is projected to remain in surplus, but could start narrowing next year, reflecting widening deficits on the income and services accounts. Fiscal deficits and public debt are expected to be under control.
Work remain to be done
"The current favorable economic conditions with high growth and low inflation offer a unique opportunity to push ahead with reforms," said Sebastian Eckardt, Lead Economist for the World Bank in Vietnam.
"Prudent macroeconomic policies should be accompanied by comprehensive and deep structural reforms, including regulatory reforms to remove barriers to and reduce the cost of private sector activity, human capital and high-quality infrastructure investments, and further reforms to enhance productivity of state-owned enterprises," he added.
Despite improved short term prospects, risks remain significant. Domestically, slower progress in restructuring state-owned enterprises and banking sectors could adversely impact the macro-financial situation, undermine growth prospects, and create large public-sector liabilities.
With this regard, Eckardt suggested the government should ensure efficiency in public investment, along with encouraging the participation of private sector in public infrastructure development.
The most important asset to a country is human resource, he added. As growth will translate to job creation and higher wages, the government should ensure that the next generation is equipped with adequate skills to meet demands arising from a fast-changing world.
External risks include escalating trade protectionism, heightened geopolitical tensions and faster-than-expected monetary tightening which could lead to disorderly financial market movements.
According to Pham Minh Duc, senior economist of the World Bank, trade facilitation through trade costs reduction and competitiveness enhancement remain vital for Vietnam's sustainable development.
While Vietnam has made great progress in reducing tariffs, there remains significant potential to reduce trade cost through rationalization of non-tariff measures or specialized controls, more efficient border management and logistics, Duc added.