The revised growth forecast is below 6.2% the WB projected earlier this year and the Government’s target of 6.7%.  

The economy would expand by around 6% this year, the WB’s Acting Country Director for Vietnam, Achim Fock, said at an event held in Hanoi on July 19 to announce a report on Vietnam’s economic outlook.

Fock said the downward adjustment was attributable to the adverse impact of the recent drought and saltwater intrusion on agriculture and the slower growth of the manufacturing sector.

Asked  about how the mass fish deaths along the central coast caused by industrial waste from Formosa Ha Tinh Steel Corporation in April would affect Vietnam’s economic performance, Sebastian Eckardt, senior economist of the WB in Vietnam, did not gave a direct answer but called for Vietnam to apply strict environmental rules and strengthen monitoring to prevent a similar incident from occurring.

The WB said after robust growth last year Vietnam’s economy grew at a slower pace of 5.5% in the first half of this year compared to 6.3% in the same period last year.

Fock noted that Vietnam needs to focus on in-depth restructuring to improve labor productivity if the country wants to the economy to fare better.

The report said inflation is still under control though it has inched up in recent months and pressure on price hikes for consumer products. In this context, monetary policy is being implemented in a way that supports growth and stabilize the macro economy, but the concern is that credit has increased sharply in the year to date.

The State Bank of Vietnam has taken action by setting safety ratios for credit institutions in order to cushion any negative impact of strong credit growth and improve the quality of loans.

Another concern is the lingering fiscal imbalance, which has existed for years, according to the report, as budget deficit was estimated to account for 6.5% of the nation’s GDP as of end-2015. Public debt made up 62.2% of GDP and is swelling to the 65% ceiling set by the National Assembly. Budget collections and spending in the first six months of this year showed budget pressure has not eased.

The Government has pledged to keep public debt at safe levels and should take action to balance budget collections and spending for the medium term, Eckardt said.

Another report on Vietnam’s elderly people released on the same day warned of an aging population in Vietnam. The country now has about 6.5 million people aged at least 65 but the number is forecast to treble to 18.4 million in 2040.

Vietnam is among the countries with the fastest aging population but its average income is much lower than most of the other aging nations, said Philip O’Keefe, lead economist at the WB in Vietnam.

Population aging will affect the economy, society and labor market, and pose many challenges for policymakers, businesses and people in a country.

It is important for Vietnam to have proper policies for the labor market as well as pension and healthcare systems.

Source: The SaiGon Times