Photo: Viet Tuan
Despite downgrading global growth the World Bank still expects Vietnam to grow at an average of 6.3% in 2016-2018.
The World Bank has downgraded its 2016 global growth forecast to 2.4 per cent from the 2.9 per cent it projected in January.
Vietnam’s growth, however, remains among the strongest in East Asia and Pacific thanks to increasing consumption from lower raw material prices.
According to the latest update to its Global Economic Prospects report, released on June 7 in Washington D.C., Vietnam is still expected to grow by 6.3 per cent in the 2016-2018 period due to foreign investment being poured into its cost-competitive manufacturing industry.
Regarding global growth, the reason for the World Bank’s reassessment is the sluggish growth being seen in advanced economies, stubbornly low commodity prices, weak global trade, and diminishing capital flows.
Commodity-exporting emerging markets and developing economies have struggled to adapt to lower prices for oil and other key commodities and this accounts for half of the downward revision.
Growth in these economies is projected to advance at 0.4 per cent this year, a downward revision of 1.2 percentage points from the January outlook.
The World Bank also predicted that Vietnam will have to address a large budget deficit. State-owned enterprise (SOE) reform, which includes improving transparency and governance, will help it reduce the associated fiscal risks.
A significant increase in private sector credit, fueled by an era of low interest rates and, more recently, rising financing needs, raise potential risks for several emerging market and developing economies, the report notes.
“As advanced economies struggle to gain traction, most economies in South and East Asia are growing solidly, as are commodity-importing emerging economies around the world,” wrote World Bank's Chief Economist and Senior Vice President Kaushik Basu.
“However, one development that bears caution is the rapid rise of private debt in several emerging and developing economies. In the wake of a borrowing boom, it is not uncommon to find that non-performing bank loans, as a share of gross loans, quadruple.”
The World Bank’s January 2016 Global Economic Prospects report, released on January 6, put Vietnam among emerging countries with the strongest growth prospects.
Contributing to the gains are rapid investment growth buoyed by robust confidence and foreign direct investment (FDI), consumption growth fueled by solid labor markets, and export growth as Chinese FDI projects in export industries come onstream.