The medium-term outlook for the Vietnamese economy is broadly positive despite persistent downside risks, the World Bank (WB) said in its East Asia and Pacific Economic Update released on October 10.

Illustrative image (Photo: VNA)

In the report, themed “Weathering Growing Risks”, Vietnam’s GDP expansion is projected to decelerate from 7.1 percent in 2018 to 6.6 percent in 2019, reflecting slower export growth and weaker agricultural production growth.

Growth is expected to further moderate in 2020 and 2021 to a more sustainable pace of 6.5 percent, in line with potential output.

Over the forecast horizon, inflation is predicted to stay below the government’s 4 percent target, and the current account is estimated to sustain a smaller surplus, according to the WB.

The report added Vietnam remains susceptible to changing global economic conditions, given its high trade openness and relatively limited fiscal and monetary policy buffers. An escalation of trade tensions and a sharper than expected global downturn could weigh on Vietnam’s growth.

Bolder implementation of structural, fiscal and banking sector reforms would help to mitigate downside risks and support sustained high growth, the WB said in its economic update.

According to WB experts, strong growth in domestic consumption and improving competitiveness are the two main drivers of Vietnam’s economic growth at present.

Regarding the foreign direct investment (FDI) flow into Vietnam over the last nine months, WB lead economist for Vietnam said the country remained an attractive destination for foreign investors and attracted more FDI than other countries in the region.

However, the connectivity between FDI and private firms in Vietnam is still weak. Therefore, the Government should take appropriate measures to solve this problem, he added.

In its report, the WB forecast growth in developing East Asia and Pacific economies will decline from 6.3 percent in 2018 to 5.8 percent in 2019, 5.7 percent in 2020 and 5.6 percent in 2021.