WB: Vietnam’s economy shows fundamental strength

Kết quả hình ảnh cho WB: Vietnam’s economy shows fundamental strength
Amidst strengthening recovery in the global economy since late 2016, Vietnam’s gross domestic product (GDP) expanded by 5.7 percent during the first half 2017, while inflation has so far moderated and core inflation remains low, at less than 2 percent.
According to the World Bank bi-annual Taking Stock report, the service sector (which accounts for about 42 percent of GDP ) accelerated in the first half of this year, driven by buoyant retail trade growth, as a result of sustained growth of domestic consumption. Industrial production remains robust despite a significant reduction of output in the oil sector, and growth has gradually recovered in agriculture, though the recovery is still fragile.
“Vietnam’s economy is strong, as a result of strong momentum of Vietnam’s fundamental growth drivers - domestic demand and export-oriented manufacturing. These are good conditions to address critical structural bottlenecks to medium term growth while solidifying macroeconomic stability and rebuilding policy buffers”, said Mr Sebastian Eckardt, Lead Economist and Acting Country Director for the World Bank in Vietnam.
Monetary policy continues to balance growth and stability objectives, with low real interest rates and rapid credit growth of about 20 percent (year-on-year). The rising credit intensity of growth, and sustained acceleration of credit may raise concerns over asset quality, particularly given the past unsolved bad debts.
After a large surplus in 2016, Vietnam’s external current account balance started to decline in early 2017, due to an expected recovery in import growth. The nominal exchange rate has been relatively stable, but the real exchange rate continues to appreciate.
The report, announced in Hanoi on July 13th, pointed out that real exchange rate appreciation is driven by a large external surplus of the FDI sector, but is a concern for Vietnam’s domestic private enterprises, which continue to face significant competitiveness challenges.
Looking forward, Vietnam’s medium-term outlook remains positive, with real GDP growth projected to accelerate slightly to 6.3 percent in 2017, as a result of buoyant domestic demand, rebounding agricultural production, and strong export-oriented manufacturing, aided by a recovery in external demand. Inflationary pressures will remain moderate, reflecting stable core inflation, lower food and energy prices and diminishing administrative price hikes.
The current account is expected to remain in surplus, albeit at a lower level as stronger import growth resumes. Over the medium term, growth is projected to stabilize at around 6.4 percent in the 2018-2019 period, accompanied by broad macroeconomic stability.
Containing risks from rapid credit growth requires continued improvements in supervision and prudential regulation. The longer term challenge for the Vietnam is to sustain rapid growth and poverty reduction. Considerable gains are possible from structural reforms that alleviate constraints on productivity growth, including through SOEs reforms, further improvements in the business environment and improved factor markets for land and capital.
Specific policy options include VAT reforms, increases in excise taxes for selected goods, a review and rationalization of tax expenditures to broaden the Company Income Tax (CIT) base and introduction of a recurrent property tax.
On the spending side, productive investment in infrastructure and human capital should be protected while focusing on efficiency gains with regard to both capital and recurrent spending./.

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All comments [ 10 ]

John Smith 14/7/17 15:43

Vietnam has benefited from a program of internal restructuring, a transition from the agricultural base toward manufacturing and services, and a demographic dividend powered by a youthful population.

Deck Hero14 14/7/17 15:44

The country has also prospered since joining the World Trade Organization, in 2007, normalizing trade relations with the United States and ensuring that the economy is consistently ranked as one of Asia’s most attractive destinations for foreign investors.

Gentle Moon 14/7/17 15:45

Given the past decade’s rapid rate of migration from farm to factory, it seems unlikely that the pace can accelerate further to raise productivity enough to offset the slowing growth of the labor force.

Pack Cassiopian 14/7/17 15:46

Among the world’s most impressive emerging market success stories of the past three decades, Vietnam has been achieving high growth rates, encouraging a huge reduction in poverty and attracting billions of dollars of foreign investment.

LawrenceSamuels 14/7/17 15:47

If Vietnam is able to maintain its current momentum, it might potentially achieve high-income status within the coming few decades.

Only Solidar 14/7/17 15:48

Vietnam’s political system places a strong emphasis on raising incomes and promoting macroeconomic stability, with once-high inflation kept in check and job creation a priority.

Jane smartnic 14/7/17 15:49

On the whole, Vietnam bucked the regional trend of the early 2010s, with its economy cooling less than many of its neighbours following the global downturn of 2008.

MaskOf Zero 14/7/17 15:50

Vietnam’s competitive advantages have continued to draw export-oriented manufacturing investment.

yobro yobro 14/7/17 15:52

Vietnam increasingly well for its institutional strength, thanks to accelerated reform, though the country still scores comparatively low.

Love Peace 14/7/17 15:53

Boosting the domestic private sector is really key to escaping the middle-income trap, looking at the countries that have successfully done so.

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