Vietnam economy predicted to increase 5.6 percent

Recently, according to Ms. Victoria Kwakwa, National Director of World Bank in Vietnam, Vietnam economy is showing its good signals in its development. The growth rate of the country is predicted to increase up to 5.6% this year.

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On December 3, World Bank (WB) announced the 2nd Review report of the year. The report also shows updates on Vietnam economic development, in which the bank raised its forecast for Vietnam economic growth rate this year to 5.6% from 5.4% in the mid-year's report. In this report, the World Bank said that Vietnam economy shows signs of recovery, with GDP growth in Quarter 3/2014 reaching an encouraging rate of 6.2%, raising the growth rate of early 9 months up to 5.6%. Accordingly, the World Bank forecasted economic growth of Vietnam will improve from 5.4% in 2013 to 5.6% in 2014. The rate is also predicted to be the rate of 2015. The optimistic prediction is given based on macro economic stability and good operation processing and manufacturing industries towards export. According to the World Bank, macroeconomic conditions also actively help improve the ranking of Vietnam on country risk, help the government successfully issue US$ 1 billion of bonds on the international market with reasonable conditions.

The Review of World Bank shows that in the context of economic recovery in general, the performances of region having foreign investment (FDI) and Vietnam enterprises are more contrast. FDI sector continues to be an important source of growth, while the domestic enterprises are still struggling with many difficulties, some businesses have closed or suspended operations. The figure is increasing. Medium-term economic prospect of Vietnam is evaluated as relatively positive, in which GDP will grow modestly and stably, macro-economy continues to be strengthened. However, this outlook will be affected by two risky factors - slow reforming progress of state enterprises and banks causing adverse effects to the macro-finance, and the orientation of Vietnam export could be affected by adverse developments of the global economy.

Ms. Victoria Kwakwa, Country Director of World Bank in Vietnam, said Vietnam economy can achieve higher growth rate as Vietnam has made progress in addressing the shortcomings of state businesses and banks. Continue to accelerate the reform and improvement of business environment in Vietnam is the key to put the economy to reach a new growth trajectory. When assessing the pace of economic reforms and institutions in Vietnam, Ms. Victoria Kwakwa said that the reform of Vietnam enterprises has not achieved the government's target yet. In the first 9 months of the year, there were 71 new state-owned enterprise privatized. WB said that the reform of state-owned enterprises was extremely important to the future success of Vietnam and the bank committed to support this reform. WB has focused on improving transparency, accountability and effectiveness of state-owned enterprises, through the support in compilation and implementation of a number of related laws and regulations.

The biggest expectation of World Bank is Vietnam government should strengthen to reform. In addition to effectively implementing new legislations on transparency and accountability, the government should prioritize the reform to help private enterprises have a same "playground" with the state-owned enterprises. This means removing all barriers to the private sector on credit, land and public procurement. Regarding public investment, the World Bank encouraged Vietnam government to apply measures to reduce fiscal deficits in the medium term, by cutting costs and increasing revenues. Recently, public debt has increased rapidly, affecting the budget, despite still being assessed as sustainable.