Drought and salinity among factors in Vietnam's GDP forecast being adjusted from 6.5% to 6.2%.
Despite considering the country to have the strongest growth prospects among large developing Southeast Asian economies, World Bank still forecasts that Vietnam’s growth would be down in 2016, at 6.2 per cent. The information was published in the World Bank (WB) East Asia - Pacific Economic Update, which was released in Hanoi on April 11.
Previously predicting that Vietnam’s economy would grow 6.5 per cent in 2016, the WB lowered its forecast due to prolonged drought and salinity in the Mekong Delta and weaker global demand.
“We reduced growth forecasts in the short and medium term for Vietnam, to only 6.2 per cent in 2016,” the report stated. “The reason is that what is happening in the region’s economy, such as saltwater intrusion, is causing many declines in agricultural production in Vietnam and negative growth in agriculture.”
WB experts are also concerned about declining exports from the foreign direct investment (FDI) sector, which are a main driver of GDP growth.
Vietnam will, however, see continued strong growth in domestic demand and manufacturing exports despite risks associated with fiscal pressure and relatively slow progress on structural reforms. Output is expected to expand at an average of 6.3 per cent during 2016 to 2018, the report notes.
State-owned enterprise reforms, including measures to enhance transparency and governance, could reduce drains on fiscal resources.
WB experts also recommended that Vietnam take suitable measures for medium-term fiscal consolidation of both revenue and expenditure because if financial plans are not more cautious the country’s financial picture may face many risks.