The Hanoitimes - Vietnam’s economy is expected to continue its growth at 6.3%, thanks to rebounding agricultural production and strong export-oriented manufacturing will contribute to higher growth, as well as high consumption demand in domestic market.
As reported in the the World Bank’s October 2017 edition of the East Asia and Pacific Economic Update report, Vietnam should continue to pursue structural reforms that can yield long-term economic benefits. Despite s slightly decrease in economic growth in Quarter I, Vietnamese economy has bounced back and increased steadily. As such, the driving forces of the growth is high consumption demand from domestic market, agricultural production and strong export-oriented manufacturing, and the services sector compensated for a contraction in the oil sector. Vietnam also have initiated measures to tackle problems in state-owned enterprise sectors, which will need to be sustained. On the other hand, Vietnam has been introducing measures to increase revenue mobilization and bring down its fiscal deficit.
Currently, almost new jobs are created in foreign direct investment enterprises (FDI), especially in enterprises in field of processing industry at rural areas, which has contributed to poverty reduction in these areas. The report stressed the mid-term prospect for Vietnam’s economy is positive. In mid term, the economic growth rate of Vietnam will be around 6.4% in the period of 2018 – 2019 along with the stable macro economy.
Vietnam’s export-oriented manufacturing sector grew by 8.4 percent and 12.3 percent year on year during the first two quarters of 2017, and total exports are expected to grow by 14.6 percent in 2017. Benign inflation allowed authorities to maintain generally accommodative monetary policies. The State Bank of Vietnam, cut its key policy rate by 25 basis points in July 2017 in an effort to stabilize interest rates and boost economic growth.
Mrs. Victoria Kwakwa, World Bank Vice President for the East Asia and Pacific Region said, “The recovery of the global economy and the expansion of global trade are good news for the East Asia and Pacific region and its continued success in improving living standards. The challenge will be for countries to strike a balance between prioritizing short-term growth and reducing medium-term vulnerabilities, so that the region has a stronger foundation for sustained and inclusive growth.”
To maintain resilience against risks, the report calls for a move away from measures aimed at short-term growth towards policies that address financial sector and fiscal vulnerabilities. These measures include: strengthening supervision and prudential regulation as Vietnam is experiencing rapid growth in private-sector credit and debt; reforming tax policies and administration to help boost revenue collection; and being ready to tighten monetary policy if warranted by the pace of interest rate increases in advanced economies.
Structural reform priorities differ across countries. Sustained reforms of the state-owned enterprise sectors can improve growth prospects. The report also highlights the potential that tourism development and deeper regional integration offer to offset the risks of protectionism. Tourism has become an increasingly important contributor to export revenue for Vietnam. Arrivals to Vietnam during the first five months of 2017 were 31 percent higher than in the same period of 2016.
Sudhir Shetty, World Bank Chief Economist for the East Asia and Pacific region said, “The improved prospects for global growth offer a window of opportunity for countries to reduce vulnerabilities while pursuing reforms that can yield growth dividends over the longer term. Reducing risks to financial sector stability and strengthening competitiveness, including through deeper regional integration, remain priorities.”
The ASEAN Economic Community offers one avenue for promoting further regional integration, including by further liberalizing trade in services and reducing non-tariff barriers.