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At the meeting to release the report. Photo: dantri.com.vn
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Over the medium term, growth is
projected to stabilize at around 6.5 percent, and inflation is projected to
remain low, says the bi-annual economic report on Vietnam.
Ousmane Dione, WB Country Director
for Vietnam, said growth
momentum picked up across major economies and global trade recovered in 2017,
adding with incomes rising and poverty falling, Vietnam’s economy had another good
year of strong growth and broad macroeconomic stability.
According the new WB report,
stronger domestic demand, robust export-oriented manufacturing, and a gradual
recovery of the agriculture sector are driving Vietnam’s economy, which
expanded by 6.4 percent during the first nine months of the year compared to
the same period last year. The manufacturing and service sector respectively
grew by 12.8 percent and 7.3 percent during the same period.
Low inflation and rising real wages
sustained buoyant domestic demand and private consumption, while the stronger
global economy helped Vietnam’s
export-oriented manufacturing and agricultural sectors. Job growth continued,
with 1.6 million new jobs added in the manufacturing sector over the past three
years, and 700,000 additional jobs in the construction, retail, and hospitality
sectors, leading to higher aggregate labor productivity. Labor demand also
contributed to rapid wage growth, with wages increasing by 15 percent
cumulatively between 2014 and 2016.
Despite progress in resolving
non-performing loans, risks remain, including the lack of robust capital
buffers in some banks, especially amidst rapid credit growth.
Fiscal tightening is underway, and
has led to a leaner budget deficit and containment of public debt accumulation.
However, the decline in public investment - falling to 16 percent of total
spending in the first nine months of 2017 compared with an average of 25
percent in recent years - may not be sustainable over time, as Vietnam needs
significant investments in infrastructure to support future growth.
A slow-down in structural reforms
could also impact the ongoing recovery, especially given the weaker growth in
investment. Enhancing macroeconomic
resilience and structural reforms can lift Vietnam’s growth potential over the
medium term.
Sebastian Eckardt, WB’s Lead
Economist for Vietnam,
said structural reform remains a central priority in view of tepid productivity
growth. Building on progress already made, Vietnam can further lift
productivity growth through investments in needed infrastructure and skills as
well as deeper reforms of the business environment, SOE and banking sector, the
WB expert added.
Source: VNA