The economy grew by 5.52% in the first six months of 2016, far less than the 6.3% expansion recorded in the same period last year, according to official data.
The World Bank attributed the economic deceleration to the impact of a severe drought and saltwater intrusion across key agricultural regions and slower industrial growth.
Agriculture, forestry and fishery output shrank by 0.2% compared with a 2.2% increase during the first quarter of 2015, while mining output also continued to contract as a result of falling global oil prices.
Growth in the construction and service sectors failed to lift overall GDP growth.
Nevertheless, Achim Fock, Acting Country Director for the World Bank in Vietnam, remained upbeat about the economy, stating that Vietnam’s medium term outlook remained positive despite slightly softer growth.
He added that sustaining high growth would depend on Vietnam’s ability to continue and deepen structural reforms to boost productivity.
According to the biannual Taking Stock report, price pressures are still under control in spite of an uptick in inflation in recent months.
However, credit growth is increasing, expanding by more than 18% from the start of the year, roughly three times the pace of nominal GDP growth.
The bank noted that fiscal imbalances remained a cause for concern with the fiscal deficit estimated to have widened to 6.5% of GDP last year.
As a result, Vietnam’s total outstanding public debt was estimated at 62.2% of GDP, inching quickly towards to the ceiling of 65% of GDP set by the National Assembly.
Sebastian Eckardt, the World Bank’s lead economist in Vietnam, said it was important for the government to follow through on its commitments to ensuring public debt sustainability and rebuilding fiscal buffers with concrete actions to balance the budget over the medium term.
He added that efforts to rein in fiscal imbalances would have to be balanced with reforms to create fiscal space to maintain investments in critical infrastructure and public services.
