The World Bank (WB) believes that Vietnam's growth will continue to improve, thanks to the recovery of exports, tourism, consumption and investment.
In the Taking Stock report released on the morning of August 26, the World Bank assessed that Vietnam's economy has good resilience in the context of many global challenges. This year's GDP is therefore forecast to increase by 6.1%, much higher than the 5.5% level that the organization gave in April. According to the World Bank, Vietnam's GDP continues to increase, with the possibility of reaching 6.5% in the next two years.
Vietnam recorded a growth rate of 6.42% in the first half of this year, according to data from the General Statistics Office. The World Bank commented that Vietnam's economy accelerated in the first half of this year thanks to the recovery of exports, consumption and investment.
The rebound in international demand has also helped stabilize the export-oriented manufacturing and services sector. Following good economic growth in the second quarter and first half of the year, the Government has updated its scenario, aiming for GDP growth of 7% this year, higher than the National Assembly's target of 6-6.5%.
Currently, in addition to the World Bank, many other international financial organizations also forecast Vietnam's growth this year at 6%, including the IMF, ADB, UOB and Standard Chartered. HSBC even forecasts a growth rate of 6.5%.
However, the World Bank's analysis team believes that Vietnam has not yet returned to its pre-pandemic growth trajectory. Domestic demand remains weak and bad debt is high in the context of weak credit growth. According to data from the State Bank, the bad debt ratio as of the end of June was 4.56%, more than double that of the end of 2022.
Trade is also expected to slow from next year, as major partners the US and China face domestic challenges. Meanwhile, inflation is on a downward trend, from 4.5% this year to 4% and 3.5% in the next two years. The current account is stable with a low surplus. The ratio of government debt and government-guaranteed debt to GDP is gradually decreasing, to 35.7% this year and 35% next year, respectively.
Mr. Sebastian Eckardt - Head of Macroeconomics, Trade and Investment Department for East Asia - Pacific at the World Bank said that to maintain growth momentum, Vietnam needs to "continue institutional reform, promote public investment, and manage and monitor risks in the financial market".
In addition to public investment, Ms. Dorsati Madani - Chief Economist at the World Bank suggested that Vietnam also needs to promote the private sector. "The external environment has changed. Green transition is happening everywhere. Vietnamese enterprises need to consider applying green technology in production. Pioneers will seize opportunities and capture more markets," she said.
Refers to America has not recognized Vietnam is a market economy, Madani said, and this will not affect the current trade flow between the two countries. Foreign direct investment (FDI) flows are also expected to remain stable. However, she said that to maintain FDI, Vietnam needs to improve the quality of its labor force and core services such as transportation, telecommunications, and electricity.
In this report, the World Bank also mentioned Vietnam's capital market. Mr. Ketut Ariadi Kusuma - senior financial expert at the World Bank commented that Vietnam's capital market currently has a higher capitalization than Indonesia's and could surpass the Philippines in the near future.
However, Vietnam is still a frontier stock market. The functions of capital mobilization, savings and valuation are limited. The proportion of institutional investors is still low and the investment channels of social insurance are not diverse.
Vietnam's stock market is currently classified as a frontier market by two organizations, MSCI and FTSE Russell. In particular, FTSE Russell has put Vietnam on the waiting list for upgrading to Group 2 - emerging market. Vietnam aims to upgrade its stock market from frontier to emerging by 2025.
"Billions of dollars of global investment funds will be poured into capital markets if Vietnam is upgraded to emerging market status. It is necessary to gradually diversify the investment channels of social insurance funds to improve long-term profits," said Mr. Kusuma.
WB's previous calculation, Vietnam's stock market can attract more 25 billion USD foreign capital when upgraded. The legal framework is being completed by the authorities, such as loosening conditions deposit for foreign investors, so that the market can be considered for upgrading soon.
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