Vietnam's economy continues to grow below potential: World Bank

The World Bank has predicted that Vietnam’s economy will grow by 5.4% in 2014, the same pace as 2013, before edging up slightly to 5.5% the following year − significantly lower than the 7% average during 2006-2011.

In its latest report on developing economies in East Asia, the bank said despite improved macroeconomic stability, Vietnam’s economic growth remained sluggish and continued to come in below its long-term potential.

Vietnam’s annual inflation fell from the record high of 23% in August 2011 to 4.31% in August this year and down to 3.62% in September, data released by the General Statistics Office showed.

Illustration photo (Photo: Thai Thien)

World Bank economist Sandeep Mahajan said that growth for the whole of 2014 could be higher given there are still several months left.

Last month, the General Statistics Office (GSO) revealed that Vietnam’s economy picked up in the third quarter, growing by 6.19% compared with the 5.42% pace in the previous three months.

According to the World Bank, Vietnam’s growth was hampered by structural problems in State-owned enterprises (SOEs) and the banking sector, while policy weaknesses continued to impede domestic private investment and competition in key sectors.

The bank recommended that Vietnam regain higher growth rates by further restructuring the banking sector to improve access to credit, creating a level playing field for both the public and private sector, and easing regulatory restrictions.

Expert Mahajan noted that although foreign investment had slowed in recent months, the level was still quite high and this sector remained a key driver of Vietnam’s growth.

At the same time, a lack of confidence in the domestic private sector continued to be a drag on growth.

According to the World Bank estimate, the foreign sector accounts for nearly 20% of Vietnam’s total economic output, two thirds of the country’s export revenue, and 25% of its total investment.

Commenting on the slow pace of SOE and banking sector restructuring, economist Mahajan said that this was not an easy process and required many policies to be put in place.

He added that the global crisis has reduced the demand to buy shares in Vietnam’s restructured SOEs and banks, which was further dampened by the lack of transparency in their financial performance.

(Source: nhandan.org.vn)