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A Report released on July 19th by the World Bank in Vietnam, the biannual Taking Stock, attributes the slower growth to the impact of a severe drought on agricultural production and slower industrial growth.
“We expect GDP growth of 6% this year. Despite slightly softer growth this year, Vietnam’s medium term outlook remains positive. Achieving sustained high growth will depend on Vietnam’s ability to continue and deepen structural reforms to boost productivity”, said Mr Achim Fock, Acting Country Director for the World Bank in Vietnam.
Price pressures remain contained despite a slight pick-up in inflation over recent months. However, credit growth is elevated, expanding at more than 18% since the beginning of the year. Against this backdrop, monetary policy continues to balance growth and stability objectives.
The Report stressed that to address rising concerns about adverse impacts of rapid credit growth on lending quality, the State Bank of Vietnam adopted tighter prudential regulations which are expected to mitigate potential asset-liability mismatches and moderate credit growth.
Accumulated fiscal imbalances remain a cause of concern, with the fiscal deficit estimated to have widened to about 6.5% of GDP in 2015. As a result, Vietnam’s total outstanding public debt was estimated at 62.2% of GDP, inching quickly toward the ceiling of 65% of GDP. Fiscal outturns in the first months of 2016 suggest that budget pressures persist.
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According to Mr Sebastian Eckardt, Lead Economist for the World Bank in Vietnam, the Vietnamese Government has made commitments to ensure public debt sustainability and rebuild fiscal buffers.
“It is important that this commitment is now followed through with concrete actions to balance the budget over the medium term. Efforts to rein-in fiscal imbalances will have to be balanced with reforms to create fiscal space to maintain investments in critical infrastructure and public services”.
The Report’s special focus, “Promoting healthy and productive aging in Vietnam” looks at Vietnam’s rapid aging pace and suggests policy actions required to address aging related challenges. While today there are only around 6.5 million people in Vietnam who are 65 years or older, this number is expected to almost triple to 18.4 million by 2040.
The speed of aging in Vietnam is among the fastest globally to date and Vietnam is undergoing this demographic transition at a lower income level than most currently old countries.
The Report also showed that population aging will have wide ranging implications. It will affect labor markets and pose new challenges for policy makers, employers and the population at large. Mitigating these impacts will require policy actions in labor markets, pension system and health care and long term care systems./.