World Bank raises Vietnam’s growth forecast to 6.7% for 2017
This means that Vietnam is expected to meet the growth target aimed for by the government, which many experts had earlier written off as an elusive goal given the weaker-than-expected growth in the first half of 2017.
But stronger domestic demand, robust export-oriented manufacturing, and a gradual recovery of the agricultural sector are driving the Vietnamese economy, which expanded by 6.4% in the first nine months of the year.
The World Bank said in a Taking Stock report released on December 11 that domestic demand remained buoyant, fuelled by a low inflation rate and rising real wages, while global demand recovery helped Vietnam’s manufacturing and agricultural sectors.
According to the General Statistics Office (GSO), Vietnam’s economy strengthened in the third quarter, growing by 7.46% from the same quarter last year, thanks to a strong performance in the manufacturing of electronic and steel products.
Samsung Vietnam ramped up their production of high-end gadgets in the period from July to September while the Formosa Ha Tinh Steel Plant also began their operations during this period.
The World Bank said that Vietnam’s near-term outlook has improved over the past six months but warned that a slowdown in structural reform could weaken the ongoing recovery and weigh on Vietnam’s medium-term growth potential.
Sebastian Eckardt, the World Bank’s lead economist for Vietnam, said structural reform remains a central priority in view of tepid productivity growth.
He added that by building on progress already made, Vietnam can further lift productivity growth by making investments in needed infrastructure and skills as well as through deeper reforms of the business environment, state-owned enterprises, and the banking sector.
As part of the Taking Stock report, the World Bank looks at fundamental reforms in key public services in order to identify opportunities for constraining expenditure growth as Vietnam’s public debt is approaching the allowed limit of 65% of GDP.
According to the World Bank, the government has already responded to the tight budget constraints by cutting spending growth, especially in investment and other discretionary spending.
But such measures, while effective in the short term, are not sustainable over time as they may harm the necessary investment in infrastructure and human capital.
The World Bank said that in order to improve spending efficiency, it is important to better align spending with national priorities, maximising the impact of capital and achieve efficiency gains in key sectors of the economy.