WB forecasts Vietnam's GDP growth at 6.7% this year

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“With incomes rising and poverty falling, Vietnam’s economy had another good year of strong growth and broad macroeconomic stability,” said Ousmane Dione, the World Bank’s Director for Vietnam.

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 5% 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.

Sebastian Eckardt, the World Bank’s lead economist for Vietnam, noted that structural reform remains a central priority in view of tepid productivity growth.

Sebastian Eckardt, the World Bank lead economist for Vietnam. (Photo: VET Magazine)

He added that building on progress already made, Vietnam can further raise productivity growth through investments in infrastructure and skills, as well as deeper reforms of the business environment, SOEs and the banking sector.

Taking Stock’s special section focuses on improving efficiency and equity of public spending. With public debt closes to the statutory limit of 65 percent of GDP, Vietnam’s government faces tight budget constraints for several years to come. This special topic section looks at fundamental expenditure reforms in key public services to identify opportunities for constraining expenditure growth through improvements in expenditure productivity.

The World Bank suggested that Vietnam take advantage of the cyclical uptick to strengthen macroeconomic resilience and carry out structural reforms to boost productivity and lift potential growth.

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