VietNamNet Bridge – GDP growth in Vietnam will rise modestly to 5.5% by 2015, with macroeconomic stability largely restored, according to the World Bank’s latest report.

The Taking Stock report, a bi-annual assessment of Vietnam’s economy, identifies several critical risks to macro-economic stability, including: (i) low foreign exchange reserves; (ii) fragile private sector demand, (iii) possibility of departure from fiscal and monetary discipline; (iv) slow progress on structural reforms; and (v) loss of confidence in a fragile banking sector.

The report says that the medium-term macroeconomic outlook remains favorable on balance. Reenergizing medium-term growth will require renewed attention to a number of structural reforms, with focus on State-owned banks and enterprises.

Victoria Kwakwa, WB Country Director for Vietnam, said the country has done well in ensuring macroeconomic stability over the past year, which has been underpinned by moderating inflation and strengthening external accounts. “Focus should now be made on the slow moving structural reforms to reposition Vietnam on a higher growth trajectory,” he added.

Sandeep Mahajan, WB Lead Economist, said with rising pressures on the budget, the government is faced with some crucial policy choices, as it seeks to balance the twin objectives of faster growth and macroeconomic stability.

The Taking Stock  notes that progress on State-owned enterprise (SOE) restructuring has been slower than expected, and more work is needed to ensure that the targets chosen for SOE reforms are feasible; proper account is taken of the complexity of the issues and specificity of individual SOEs; and, oversight and coordination mechanisms are strengthened. Non-performing loans (and the uncertainty around their true measure) in the banking sector remain a major concern, and due attention is needed to issues of bankruptcy, insolvency, and creditor rights which will facilitate corporate debt restructuring.

The report also looks at 3 special topics, namely: 1) Trade facilitation, competitiveness and growth in Vietnam, 2) Corruption and economic growth in Vietnam, and 3) Poverty and inequality in Vietnam.

With regards to trade facilitation, competitiveness and growth in Vietnam, the report emphasizes that while exports have remained strong in recent years despite a difficult external environment, they remain dominated by low value products. It suggests an enhanced emphasis on greater value added, which requires the strengthening of transport infrastructure and logistics, regulatory procedures for trade, and supply chain organization.

Source: VOV