Vietnam growth might slow over next two years: World Bank

Vietnam’s GDP is likely to drop from 6.8 percent this year to 6.6 percent next year and 6.5 percent in 2020, the World Bank forecasts in its bi-annual report on Vietnam titled "Taking Stock" issued on Tuesday.

The slower growth will come because Vietnam, as a country with high trade openness, might have to face risks as the global economic environment becomes less favorable, the report says.

Globally, real GDP growth is projected to moderate from 3 percent this year to 2.9 percent next year. One of the reasons for the decrease is weaker global trade and investment growth as trade war tensions between the U.S. and China escalate.

"Slower global growth and ongoing trade tensions creates a lot of uncertainties for Vietnam," said Sebastian Eckardt, World Bank lead economist for Vietnam at the report releasing event.

Weaker global demand for exports and reduced investment trade flows into Vietnam as the U.S. Federal Reserve raises interest rates are other risks could affect Vietnam’s economy, he added.

He further said that the country should "maintain a responsive monetary policy, exchange rate flexibility and low fiscal deficit to enhance its resilience against potential shocks."

Although there are weakening external conditions, growth in Vietnam has proven resilient, supported by strong domestic demand and a dynamic export-oriented manufacturing sector, the report says.

It forecasts Vietnam’s GDP expansion this year to be the same as last year at 6.8 percent.

Inflation will remain at 4 percent thanks to the central bank’s tight monetary policies, and World Bank forecasts the figure will stay the same in the next two years.

Public debt will increase slightly from 61.4 percent of GDP last year to 61.5 percent, but still below the limit of 65 percent that Vietnam allows. The report forecast this figure to remains the same next year before dropping to 61.4 percent in 2020.

Ousmane Dione, World Bank country director for Vietnam, said: "Despite a challenging global context, Vietnam continues to achieve robust growth accompanied by moderate inflation and a relatively stable exchange rate."

He felt policy makers should take advantage of Vietnam’s current favorable growth to strengthen the private sector and improve public sector investment efficiency.