(VOVworld) – The global economy has been recovering but risks remain. In that context, Vietnam’s economy has also grown, but positive signs have been counterbalanced by potential challenges. The World Bank released on Monday an updated report on Vietnam’s economic growth in the first half of 2015.

Delegates at the release of the WB report on July 20, 2015

The WB report said that in the first half of 2015 Vietnam’s economy rebounded with a GDP growth of 6.28%, the highest rate in 5 years.

Vietnam’s economy: recovery and challenges

The recovery of Vietnam’s economy is attributable to positive performance of the processing, manufacturing, and construction sectors. Retail revenues of goods and services have also increased sharply. With low inflation, the State Bank of Vietnam has eased its monetary policies to support economic activities and has adjusted exchange rates to maintain the economy’s competitiveness. Doctor Sandeep Mahajan, the WB’s chief economist in Vietnam, said: “Reform in the banking sector has progressed, especially in merging. Many small banks were merged with big commercial banks. Vietnam should increase the ratio of private ownership in equitized state-owned enterprises”.

Besides positive prospects in the medium term, Vietnam’s economy is not yet out of the woods. Public debt, weak investment, and the restructuring of state-owned enterprises are major obstacles slowing down economic growth. The balance of trade is predicted to narrow significantly this year due to slower export growth. Sebastian Eckardt, a WB senior economist, said: “Vietnam is probably of the fast growing economies regionally and internationally. Vietnam expects a growth by the end of the year and our baseline assessment is at 6%. But the recovery maintains a momentum and possibly exceeds 6%. The unbalanced trade could impact trace account but because of the strong and resilient remittances, we expect curtain surplus by the end of the year. Fiscal deficit in line with government targets, we expect that public debt will continue the upward trend but remain below the current 75% of GDP.”

Economic prospects

WB experts predict Vietnamese economic growth of 6 to 6.2%, due to the recovery of domestic demand and an increase in personal investment and consumption. Inflation is estimated at 2.5% and current account is positive at 0.5% of GDP. The budget deficit will be reduced by efforts to cut expenses. Mr. Eckardt said Vietnam will increase exports, particularly in the manufacturing and electronics sectors.

2015 is a pivotal year in Vietnam’s global integration process, with a number of trade agreements signed or under negotiation. Membership in new free trade agreements will generate fresh momentum for Vietnam’s economy. Trade barriers will be removed, giving Vietnamese businesses opportunities to access foreign markets of high added value. Vietnam’s exports are predicted to grow 20% in the next few years. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry, says: “Businesses should take steps right now, and not wait until the free trade agreements take effect. They should acquire up-to date information, analyze advantages and disadvantages in their sector, work out action plans, and promote their products in markets that have a preferential tariff.”  

Considering Vietnam’s economic achievements in the first half of 2015, the WB has made a positive forecast of Vietnam’s growth. Brighter economic prospects in the US, the EU, and Japan – Vietnam’s big trading partners – will carry an advantage for Vietnam’s exports, boosting an already steady growth.