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Vietnam Today

WB: 2018 GDP growth of 6.8% expected

Released at: 09:46, 15/06/2018

WB: 2018 GDP growth of 6.8% expected

Photo: Ngoc Lan

Work needs to be done to maintain growth momentum, according to World Bank's Taking Stock report.

by Ngoc Lan

Vietnam’s GDP is expected to grow 6.8 per cent in 2018 but challenges also remain in maintaining growth momentum, according to the latest economic update on Vietnam from the World Bank, entitled Taking Stock, released in Hanoi on June 14.

The report noted that recent growth was driven by a cyclical increase in global demand as well as a recovery in investment from the private sector and foreign investors and an ongoing shift of labor away from agriculture into more productive manufacturing and service sectors.

Mr. Ousmane Dione, World Bank Country Director for Vietnam, said the country’s high economic growth in 2017 and in the first quarter of 2018 was impressive and gives the country a firm foundation to move forward. “This period of robust economic activity is a great opportunity to invest in human capital, so that the country can address the challenge of maintaining this growth momentum,” he said.

According to the report, Vietnam’s trade balance continued to improve owing to strong trade performance and FDI inflows, contributing to the overall current account surplus, estimated at 6.8 per cent of GDP in the first quarter of 2018. The exchange rate has been relatively stable while foreign currency reserves continued to rise, reaching about $63 billion in the first four months of 2018, or around 3.6 months’ worth of imports.

Against a backdrop of low inflation, monetary policy remains accommodative. The CPI has been ticking up slightly, at 2.8 per cent year-on-year in April, driven by price hikes in electricity and health services. Rapid credit growth and abundant liquidity could worsen volatility in Vietnam’s financial markets, especially against the anticipated tightening of global monetary conditions.

Public debt has stabilized since 2017, with an overall fiscal deficit of 4.5 per cent of GDP, and the public-debt-to-GDP ratio declined to 61.4 per cent in 2017 from 63.6 per cent in 2016.

At the launch of the report, Mr. Sebastian Eckardt, Lead Economist for the World Bank in Vietnam, said that the current favorable economic conditions, with high growth and low inflation, offer a unique opportunity to push ahead with reforms. “Prudent macroeconomic policies should be accompanied by comprehensive and deep structural reforms, including regulatory reforms to remove barriers to and reduce the cost of private sector activity, human capital, and high-quality infrastructure investments, and further reforms to enhance the productivity of State-owned enterprises,” he said.

Regarding policy, the World Bank pointed out the priorities for promoting trade facilitation. In particular, the customs office is the final intervention point for goods clearance at the border and priority should be given to reducing costs associated with specialized controls.

Mr. Pham Minh Duc, Senior Economist at the World Bank, said that trade facilitation through trade cost reductions and competitiveness enhancements remain vital for Vietnam’s sustainable development. “While Vietnam has made great progress in reducing tariffs, there remains significant potential to reduce trade costs through the rationalization of non-tariff measures or specialized controls, more efficient border management, and logistics,” he said.

Priorities to improve the quality of logistics services is a key factor. Vietnam’s logistics service providers (LSPs) generally offer low-cost and low-quality services and cannot yet compete with their international counterparts. Therefore, priority should be given to developing non-asset based LSPs, which are crucial for the sophistication and competitiveness of transport and logistics services.

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