Growth is expected to moderate in 2020 and 2021 to a more sustainable pace of 6.5 percent due to slower growth in the export-oriented manufacturing sector and deceleration in the agricultural sector, the World Bank’s (WB) said in its East Asia and Pacific Economic Update released on Wednesday.

Inflation this year is projected to be 3 percent below the government’s 4 percent target, according to the bank.

Vietnam was the only country that did not have its growth forecast for all three years adjusted down in the WB’s April report. The bank had reduced growth forecasts for most other countries in the region, citing a weaker global and regional outlook amid escalating U.S.-China trade tensions.

However, the country remains heavily exposed to global economic sentiments given its high trade openness and limited fiscal and monetary policy buffers. With a trade to GDP ratio of close to 200 percent in 2018, Vietnam is exposed to heightened uncertainty and potential disruptions to global supply chains, the WB said.

"Further, given the widening trade surplus with the U.S., Vietnam could also become a target for tariff and other trade-related protection measures from the U.S. An escalation of trade tensions and a sharper than expected global downturn could weigh on Vietnam’s growth." 

On the domestic front, a slowdown in the restructuring of the state-owned enterprises and banking sectors could adversely impact the macro-financial situation and undermine long-term growth prospects, it warned.

Vietnam posted its highest Jan-Sept GDP growth in nine years at 6.98 percent, with manufacturing and services sectors leading the way, according to the General Statistics Office.