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IMF lowers 2016 growth forecast

Released at: 16:34, 06/10/2016

IMF lowers 2016 growth forecast

Photo: Duc Anh

Regional Economic Outlook puts Vietnam's growth this year at 6.1%, down 0.2% from April forecast.

by Doanh Doanh

Vietnam’s 2016 GDP growth will come in at 6.1 per cent and 6.2 per cent in 2017 while growth in ASEAN-5 is expected to remain stable in 2016 before rising modestly in 2017, according to the International Monetary Fund (IMF)’s Regional Economic Outlook (REO) Update released in Washington D.C. on October 5.

The October update for Vietnam’s 2016 growth is down 0.2 per cent compared with its forecast released in April.

Inflation in 2016 is forecast at 2 per cent, which is 0.8 per cent higher than the April forecast. Headline inflation is projected to rise to 3.6 per cent in 2017. “Despite a partial recovery in commodity prices, inflation is expected to remain generally low across most of the region given generally well-anchored inflation expectations and low pass-through as well as excess capacity in manufacturing in several economies,” the report stated.

ASEAN inflation is projected to rise to 2.6 per cent in 2016 and 3.5 per cent in 2017.

Vietnam’s current account balance is expected to narrow to 0.4 per cent in 2016 and 0.1 per cent in 2017.

The IMF previously reported that Vietnam’s economy has experienced solid growth with low inflation, reflecting policy attention to maintaining macro-economic stability. Economic performance was robust through most of 2015, driven by rapid export growth, FDI, and strong domestic demand.

While the near-term outlook is broadly positive, IMF analysts noted that there are downside risks, including from high and rising public debt, slow NPL resolution, prolonged drought, tighter or more volatile global financial conditions, and weak growth in key advanced and emerging economies.

The World Bank also released its East Asia and Pacific Economic Update (October 2016 edition) on October 5. The medium-term outlook in Vietnam, it wrote, is broadly positive but downside risks remain. GDP is projected to moderate to 6 per cent in 2016 accompanied by lower inflation and a small current account surplus. The fiscal deficit is projected to remain high this year but then tighten over the medium term, reflecting the government’s fiscal consolidation plans.

The report said that economic activity in Vietnam slowed somewhat in the first three quarters of this year due to the impact of severe drought on agricultural production and slower industrial growth. But macro-economic stability has been maintained and inflationary pressures remain subdued.

2013

2014

2015

2016

2017

GDP

5.4

6.0

6.7

6.1

6.2

CPI

6.6

4.1

0.6

2.0

3.6

Current Account Balance

4.5

5.1

0.5

0.4

0.1

Source: IMF, October 2016

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