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Friday,  Nov 24,2017,05:04 (GMT+7)

WB forecasts Vietnam’s 2017 GDP at 6.3%

Thanh Thom
Saturday,  Oct 7,2017,23:26 (GMT+7)
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WB forecasts Vietnam’s 2017 GDP at 6.3%

Thanh Thom

HCMC – The World Bank said in its latest East Asia and Pacific Economic Update report released on October 4 that Vietnam’s gross domestic product (GDP) growth is projected to remain resilient at 6.3% this year, driven by export-oriented manufacturing and robust domestic demand.

According to the report, broad macroeconomic stability is being maintained, but delays in fiscal consolidation and elevated credit growth may exacerbate risks to long-term stability. Acceleration of structural reforms would help raise potential growth.

Externally, strong trade linkages expose Vietnam to a potential weakening of external demand in case the ongoing global recovery loses momentum.

The report highlights some key economic developments of the country during the first quarter of this year.

For example, real GDP expanded by 5.7% year-on-year during the first half 2017 (about the same pace in the first half of 2016). Notably, labor market conditions consequently improved, with more than 270,000 wage jobs created in the six-month period.

The global lender says the medium-term outlook of the Southeast Asian nation remains positive.

In particular, real GDP growth is projected to accelerate slightly to 6.3% in 2017, underpinned by buoyant domestic demand, rebounding agricultural production, and strong export-oriented manufacturing, and also aided by a recovery in external demand, which will be only partially offset by declining oil production.

Monetary policy continues to balance growth and stability objectives. Inflationary pressures will remain moderate, reflecting stable core inflation and tapering of administrative price hikes. The current account is expected to remain in surplus, albeit at a lower level as stronger import growth resumes.

Over the medium term, growth is projected to stabilize at around 6.4% in the 2018-2019 period, accompanied by broad macroeconomic stability. Barring extreme weather related shocks, poverty is expected to fall further.

The WB warns Vietnam of domestic and external risks that require continued macroeconomic prudence. In view of resilient growth momentum, solidifying macroeconomic stability and rebuilding policy buffers should remain the foremost priority.

Specifically, lowering the fiscal deficit will help to contain rising risks to fiscal sustainability and provide fiscal space to accommodate potential future shocks. In addition, containing risks from rapid credit growth requires continued improvements in supervision and prudential regulation.

The longer-term challenge for the Vietnam, according to the WB, is to sustain rapid growth and poverty reduction.

Considerable gains are possible from structural reforms that alleviate constraints on productivity growth, including through State-owned enterprise reforms, further improvements in the business environment and more efficient factor markets for land and capital.

The gender wage gap remains a concern, particularly in the urban foreign direct investment (FDI) sector where the average wage for males rose even as that for females marginally declined unlike in rural areas where the increase was proportionate.

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