World Bank raises growth forecast, recommends Vietnam increase public investment

WB experts at the press conference on August 26 - Photo: DUY LINH

At a press conference on the morning of August 26 in Hanoi, WB experts in Vietnam commented that the figures stated in the Taking Stock report released last weekend showed "the resilience of the Vietnamese economy in the context of increasing global challenges."

Increase public investment to maintain high growth momentum

Specifically, Vietnam's GDP growth is estimated to reach 6.1% in 2024 and will reach 6.5% in 2025 and 2026. Previously, in a report published in April 2024, the WB forecast that Vietnam's economic growth would only reach 5.5% in 2024 and increase to 6% in 2025.

However, according to WB experts, Vietnam's economy has not yet returned to the growth path it had before the COVID-19 pandemic.

Therefore, Vietnam needs to further boost public investment to both stimulate short-term demand and contribute to solving the infrastructure shortage in areas such as energy, transport and logistics.

"To maintain growth momentum from now until the end of the year and in the coming years, authorities need to continue institutional reform, boost public investment, and manage and monitor risks in the financial market," Sebastian Eckardt, head of the World Bank's East Asia and Pacific Macroeconomics, Trade and Investment Department, recommended.

The World Bank's increase in growth forecast reflects the organization's appreciation of the Vietnamese Government's efforts to stabilize the economy in recent times. It is also an effort to renew traditional growth drivers such as investment, consumption, and export and promote new growth drivers.

Ms. Dorsati Madani presented positive prospects for Vietnam's economy - Photo: DUY LINH

Responding to questions sent by Tuoi Tre Online before the press conference about the efficiency of public investment in Vietnam and recommendations to speed up disbursement, WB experts highly appreciated the efforts of the Vietnamese Government in recent times.

Ms. Dorsati Madani, senior economist of the World Bank in Vietnam, said that last year the World Bank issued a report pointing out shortcomings in public investment management and ways to overcome them.

Currently, the WB is actively participating with Vietnamese partners in supporting effective public investment management.

"To improve the public investment management system, we need to start with planning first. It is a whole cycle, from planning to evaluating, selecting and considering green elements of projects - a very important point," Ms. Dorsati Madani raised the issue.

The WB expert explained that in the context of FDI shifting, in order to continue to maintain its attractiveness in the eyes of investors, Vietnam needs to create a more favorable and "greener" environment. With public investment, to make a big difference, Vietnam needs to prioritize projects, from the national to the regional level.

Regarding the issue of public investment implementation, according to Ms. Dorsati Madani, there are many problems that can be completely solved through the introduction of new regulations. For example, the Government is considering amending the Law on Public Investment to support and facilitate procedures to promote public investment implementation.

Creating long-term capital for the economy

Mr. Andrea Coppola, a World Bank expert in Vietnam, recommends that Vietnam should diversify its markets and export goods to avoid recession shocks from traditional large markets - Photo: DUY LINH

Also at the press conference on the morning of August 26, experts discussed ways to help Vietnam have a strong capital market. The WB emphasized that developing the capital market will create an important source of long-term capital for the economy, thereby helping Vietnam achieve its goal of becoming a high-income country by 2045.

For Vietnam to unlock the potential of its capital markets, it needs to overcome a number of specific barriers to ensure healthy and sustainable growth. Among them, it is necessary to take advantage of the Social Insurance (SI) fund, considering it a potential key resource in promoting capital market development, according to the World Bank.

Due to the lack of a large proportion of institutional investors in the stock market, individual investors have become dominant, thereby creating many fluctuations due to herd-like buying and selling behavior. This also contributes to the accumulation of risks in the corporate bond market and limits the stock market from becoming a capital mobilization channel for the corporate sector.

Managing a portfolio equivalent to 10% of GDP, the Social Insurance is the largest institutional investor in Vietnam, larger than all other domestic institutional investors combined. However, due to legal regulations, the assets of the Social Insurance are mainly concentrated in government bonds.

If the Social Insurance diversifies its investments into corporate securities markets such as stocks and bonds, its investments will support the development of those markets by diversifying its investor base and creating relative stability as a long-term investor.

"If implemented properly in small steps, investment diversification will increase investment returns for social insurance in the long run," the WB recommended, adding that a stronger policy framework is needed for social insurance to become a key factor promoting capital market development.

Expert Ketut Ariadi Kusuma (middle) presents detailed recommendations for social insurance to become a key factor promoting the capital market, creating resources for the long-term economy - Photo: DUY LINH

According to Mr. Andrea Coppola, Chief Economist and Manager of the Equitable Growth, Finance and Institutions Program of the World Bank in Vietnam, through recent incidents related to corporate bonds, it is time for Vietnam to have an agency to screen and supervise corporate bond issuers.

It can be understood simply that there needs to be a credit rating of bond issuers. Secondly, from the investors' side, it is necessary to ensure that they have full information through a reputable third party, helping them make informed decisions.

"Billions of dollars of global investment funds will be poured into capital markets if Vietnam is upgraded to emerging market status," said Ketut Ariadi Kusuma, senior financial sector expert at the World Bank. "At the same time, it is necessary to gradually diversify the investment channels of social insurance funds to improve long-term profits and increase resources for economic growth through investment in the business sector."

Source: https://tuoitre.vn/ngan-hang-the-gioi-nang-du-bao-tang-truong-khuyen-nghi-viet-nam-tang-dau-tu-cong-20240826141850768.htm