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WB retains 6.3% growth forecast

Released at: 10:08, 05/10/2017

WB retains 6.3% growth forecast

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Export-led manufacturing and rising domestic demand to result in 2017 GDP growth of 6.3%, World Bank predicts.

by Quynh Nguyen

Vietnam’s economy is projected to grow at around 6.3 per cent this year thanks to strong export-led manufacturing sectors and sharply increasing domestic demand, according to the latest estimates from the World Bank (WB).

The 6.3 per cent forecast was previously made by the WB. 

Macroeconomic stability remains, it said, but the delay in fiscal consolidation and rapid growth of credit can increase long-term risk. Speeding up the process of economic restructuring will help improve growth potential.

In terms of external factors, its strong economic integration into foreign trade also makes Vietnam vulnerable to the current global economic slowdown.

Despite slight declines, especially in the first quarter of 2017, Vietnam’s economy continued to show solid growth momentum. GDP in the first six months was estimated at 5.7 per cent year-on-year.

Mining output was down 8.2 per cent, mainly due to the fact that Vietnam’s oil fields are experiencing declining natural production and the mining sector is becoming more complex.

Conversely, domestic demand and the manufacturing and processing industries grew well. The services sector rose 6.9 per cent due to a sharp increase in retail sales from higher domestic consumption.

Vietnam’s medium-term economic outlook remain positive, the bank confirmed, with 6.3 per cent GDP coming from domestic demand, agricultural production, the manufacturing sector, and recovery in external demand.

However, the decline in the mining sector - especially crude oil extraction - has had a negative impact on overall growth. Inflationary pressure is moderate due to stable core inflation and adjustments to prices of goods and services being managed by the State.

Domestic and external risks require Vietnam continuously adopt prudent macroeconomic measures. To sustain growth, macroeconomic stability and renewable policy buffering should be considered top priorities.

The WB forecasts that the long-term challenge for Vietnam is to maintain high growth rates coupled with sustainable poverty reduction. Continuing to accelerate economic restructuring (especially SOE reform), improving the business environment, and effectively operating the market for inputs, such as land and capital, will help remove the major barriers to improving efficiency and increasing productivity.

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