In a report it released on Wednesday, ‘Vibrant Vietnam: Forging the Foundation of a High-Income Economy’, the WB said domestic and foreign business environments in Vietnam are volatile, and the nation should not rely too much on past successes and has to make upgrades to its current economic model if it wants to continue to flourish.

Vietnam has achieved impressive economic, social and educational development over the past two decades, it acknowledged.

But, especially with the global pandemic, conditions that acted as favorable tailwinds and helped Vietnam grow quickly could now turn into headwinds, it warned.

Ousmane Dione, its Country Director for Vietnam, said: "Vietnam is one of the greatest development success stories of our time. The country, however, is now at a turning point where some of its traditional drivers of growth are gradually weakening."

"To achieve its ambition to become a high-income economy by 2045, Vietnam must put productivity growth front and center of its economic model. In other words, it needs to grow not only faster but also better," he said.

To strengthen the country’s productive assets, the report suggested a productivity-focused development strategy via four policies - dynamic firms (encouraging competition and easing firm entry and exit), efficient infrastructure (improving the efficiency of financing and delivering additional construction), skilled workers and opportunities for all (boosting advanced university level and vocational-technical skills which are under-supplied), and green economy (using natural resources far more efficiently).

Vu Viet Ngoan, former head of the Prime Minister’s Economic Advisory Group, agreed with the report saying the old growth engines of Vietnam, such as resources and cheap labor, have reached their limit.

Meanwhile, geo-political changes sweeping the world would helping Vietnam further open its economy, he added.

"If Vietnam wants to achieve the goal of integrating with high-income economies, the country needs to change its growth model. The average annual growth rate of Vietnam's labor productivity must reach 6.5 - 6.75 percent compared to 4.75 period in the period from 2011 to 2016."

Besides, in the context of "economies currently competing for knowledge and technology," he said it is necessary to emphasize the role of innovation.

"In the transition period from middle to high income, it is necessary to combine the two goals of capital and knowledge."

Doan Hong Quang, a World Bank economist, said: "In many countries' experience, the PPP (public-private partnership) management framework plays an important role in attracting private capital. However, in Vietnam, this law needs to be upgraded. It is important to share risks publicly and transparently between the state and investors."

The World Bank estimates a growth of 4.9 percent for Vietnam in 2020, and the International Monetary Fund (IMF), 2.7 percent. The country's economic expansion in the first quarter fell to a 10-year low of 3.82 percent. 

The government targets GDP growth of 5 percent, banking on a rapid recovery strategy to overcome pandemic impacts.

Last year, GDP growth hit 7.02 percent, the second highest growth figure in the last decade, after a record 7.08 percent in 2018.