Vietnam Still Facing Structural Risks

Despite the generally favorable medium-term outlook, there are significant challenges facing Vietnam’s economy this year, say senior economists from the World Bank and the Asian Development Bank.

“The ADB expects that the Vietnamese economy will continue to perform strongly in 2018 and 2019. The ADB forecasts that growth will rise to 7.1% this year, before easing back to 6.8% in 2019. With that said, several structural risks exist for Vietnam’s economic outlook,” Aaron Batten, senior ADB economist in Vietnam, told Xinhua.

The structural risks include the need for deeper state-owned enterprise reform and the continued vulnerability in the financial sector, to unresolved non-performing loans and undercapitalized banks as domestic credit records rapidly grow, he said.

Another risk facing Vietnam is rising global trade protectionism, with US President Donald Trump’s “America First” policy tending to protect domestic sectors, which might lead to trade wars. “In particular, close attention also needs to be paid to rising global trade protectionism,” the ADB economist said, adding that trade wars can negatively affect Vietnam’s economic growth.

According to Batten, Vietnam has actively sought out preferential market access with other economies through a range of trade and investment agreements. For example, the European Union and Vietnam plan to finalize their free trade agreement this year building on past agreements with Japan, South Korea and others, negotiated through ASEAN, the ADB economist noted.

Vietnam needs to work towards improving its global competitiveness and productivity so that its firms can compete in new markets, he said.

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ADB forecasts Vietnam growth to rise to 7.1% this year.