World Bank reaffirms bright outlook for Vietnam’s economy in 2017

By VnExpress, Reuters   January 12, 2017 | 01:58 pm GMT+7

But it has once again called for reforms to state-owned enterprises and fiscal consolidation for a more stable growth path.

The World Bank this week said that Vietnam’s economy would expand at an average of 6.3 percent in the next three years, with all categories of demand buoyed by strong foreign direct investment and manufacturing exports.

In its latest "Global Economic Prospects" report, the Washington-based lender said, like many other countries in the East Asia and Pacific region, Vietnam needs medium-term fiscal consolidation to rebuild the policy buffers.

The bank added that for Vietnam, as well as Thailand, reforms to state-owned enterprises, including measures that enhance transparency and governance, “could reduce pressure on fiscal resources.”

The Vietnamese economy expanded 6.21 percent last year, among the fastest in the world. That came even after the country was hit by several headwinds including a prolonged drought and a devastating coastal pollution disaster in the first half of the year.

"Vietnam is in a sweet spot right now," Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong was quoted by Bloomberg as saying. "Strong growth will persist in the next several years. It is continuing to gain market share in exports and even giving China a run for competitiveness.”

“Foreign companies continue to invest in Vietnam to take advantage of its highly competitive labor and low cost. The outlook is bright and it is one of the standout economies in Asia," he told Bloomberg.

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Ease of doing business: Vietnam has improved its business environment over the years. Graphic from the World Bank's Global Economic Prospects

Globally, the World Bank is also seeing higher growth for 2017, despite uncertainty linked to a Trump presidency.

It said global growth would accelerate slightly as recovering oil and commodity prices ease pressures on emerging-market commodity exporters and painful recessions in Brazil and Russia come to an end.

In the new report, the multilateral lender said it expected 2017 real gross domestic product growth to rebound to 2.7 percent from a post-financial crisis low of 2.3 percent last year.

Growth in advanced economies is expected to edge up to 1.8 percent in 2017 from 1.6 percent in 2016, the World Bank said, while emerging and developing economies will see growth accelerate to 4.2 percent this year from 3.4 percent last year.

"After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon," World Bank Group President Jim Yong Kim said in a statement. "Now is the time to take advantage of this momentum and increase investments in infrastructure and people."

However, there was considerable uncertainty surrounding the forecasts, which did not incorporate the effects of various policy proposals from U.S. President-elect Donald Trump, which are expected to include increased fiscal stimulus from tax cuts and infrastructure spending, and a more protectionist trade stance.

The World Bank forecasts 2017 U.S. growth at 2.2 percent versus 1.6 percent in 2016, but the increase could be considerably larger and have effects far beyond U.S. shores.

It added that lingering uncertainty over the course of U.S. economic policy could weigh on global growth by keeping investment money on the sidelines until there is more policy clarity.

The World Bank said China's growth would continue to slow, easing to 6.5 percent in 2017 from 6.7 percent in 2016, but growth would edge higher in some Southeast Asian economies, including Indonesia and Thailand.

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