The manufacturing and services sector respectively grew by 12.8% and 7.3% during the same period.
According to Taking Stock, the Bank’s bi-annual economic report on Vietnam released on December 11th, the pace of growth is expected to increase to 6.7% this year. Over the medium term, growth is projected to stabilize at around 6.5%, and inflation is projected to remain low.
“Growth momentum picked up across major economies and global trade recovered in 2017. With incomes rising and poverty falling, Vietnam’s economy had another good year of strong growth and broad macroeconomic stability”, said Mr Ousmane Dione, the WB Country Director for Vietnam.
Photo: ATP
Low inflation and rising real wages sustained buoyant domestic demand and private consumption, while the stronger global economy helped Vietnam’s export-oriented manufacturing and agricultural sectors. Job growth continued, with 1.6 million new jobs added in the manufacturing sector over the past three years, and 700,000 additional jobs in the construction, retail, and hospitality sectors, leading to higher aggregate labor productivity.
According to WB Chief Economist Sebastian Eckardt, labor demand also contributed to rapid wage growth, with wages increasing by 15% cumulatively between 2014 and 2016.
Despite progress in resolving non-performing loans, risks remain, including the lack of robust capital buffers in some banks, especially amidst rapid credit growth.
Fiscal tightening is underway, highlights the report, and has led to a leaner budget deficit and containment of public debt accumulation. However, the decline in public investment - falling to 16% of total spending in the first nine months of 2017 compared with an average of 25% in recent years - may not be sustainable over time, as Vietnam needs significant investments in infrastructure to support future growth.
A slow-down in structural reforms could also impact the ongoing recovery, especially given the weaker growth in investment. Enhancing macroeconomic resilience and structural reforms can lift Vietnam’s growth potential over the medium term.
The report also showed that structural reform remains a central priority in view of tepid productivity growth.
“Building on progress already made, the nation can further lift productivity growth through investments in needed infrastructure and skills as well as deeper reforms of the business environment, SOEs and banking sector”, added Mr Sebastian Eckardt./.