Titled ‘Robust Recovery, Rising Risks', the half-yearly update gives assessments and outlooks on economies in the Asia-Pacific region.

"The target for real GDP growth in 2010 is an easily attainable 6.5 per cent," said the report on Viet Nam.

"The recovery has consolidated in recent months."

The country escaped from the global financial crisis "better than could have been anticipated" thanks to a sizeable stimulus package during the last two years.

However, World Bank economists also noted that it's time for the country to phase out its stimulus programme, given the much improved global economic environment.

On the other hand, it will be difficult to keep the inflation rate below 7 per cent in line with targets set by the National Assembly, notes the report.

"On a monthly basis, inflation started accelerating in the last quarter of 2009," reads the update.

The World Bank attributes the inflation risk to "higher commodity prices, devaluation of the dong, and adjustments in energy prices".

As for the budget deficit, the report predicts a substantial contraction compared with last year, given an overall deficit of slightly more than 6 per cent of GDP as translated from the national 2010 budget plan.

"Viet Nam's debt is likely to remain sustainable if the current economic recovery continues and authorities revert to a budget deficit in the order of 3 to 4 per cent."

The World Bank's economists also urged local regulators to increase interest rates to counter foreign currency and gold speculation.

"Gold speculation by local investors had led to worrying price spikes, affecting market sentiment," says the report.

The rising inflationary pressures and the return of large capital flows presents an emerging policy challenge and a risk to macro-economic stability, said the report in a warning to regional governments.

"The exchange rate in Viet Nam is not over-valued," said Deepak Mishra, a leading economist of the World Bank in Viet Nam, dispelling concerns over the dong's devaluation.

On the other hand, country director of World Bank Viet Nam Victoria Kwakwa recommended the country build more confidence in its macro-economic management.

Source: VietNamNet/Viet Nam News