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Vietnam's medium-term outlook favorable, significant domestic, external risks remain: WB

Xinhua, December 5, 2016 Adjust font size:

Vietnam's medium-term outlook remains favorable, with gross domestic product (GDP) expected to expand by 6 percent in 2016, said the World Bank (WB).

The latest WB report called Taking Stock, a biannual review of the country's economic performance, was launched in Vietnam's capital Hanoi on Monday.

According to the WB, that despite a fragile global environment, severe drought that has reduced agricultural output, cut down on oil production and slowed external demand, Vietnam's economy remains resilient, thanks to robust domestic demand and export-oriented manufacturing.

The country's GDP is expected to expand by around 6 percent in 2016 and to accelerate slightly to 6.3 in 2017 predicated on a recovery in agriculture and improving global prospects.

Inflation is expected to come in just below the official target of 5 percent this year and then moderate next year, the bank predicted.

The external accounts are expected to remain favorable thanks to an improved trade balance, but the current account surplus is expected to decline next year, as import growth recovers.

The fiscal deficit is projected to remain high at about 6 percent of GDP this year but expected to adjust over the medium term in line with government commitments.

"Vietnam's macro-economic stability creates a favorable environment for policy makers to accelerate structural reforms, which is crucial as the country moves toward a more productivity-led growth model," said Ousmane Dione, the WB Country Director for Vietnam.

However, the bank said Vietnamese economy's recent performance owes in part to rapid credit growth and an accommodative fiscal stance, which may support growth in the short term but amplify existing medium-term financial and fiscal risks.

In addition, easing monetary conditions and reducing credit growth can exacerbate existing macroeconomic and financial vulnerabilities.

Several risks could adversely affect medium term prospects, including delayed implementation of structural and fiscal reforms, a further slowdown in the global economy, fragile global financial market conditions, and the prospect of rising interest rates in the United States. Enditem