The IMF’s latest projection is lower than the Vietnamese government’s target of 6.7%, which many experts say is a challenging task given that the economy grew by only 5.73% in the first half of the year.
According to the IMF, Vietnam’s economy has continued to perform well and the near term-outlook is positive, however, there are a number of risks posed by high public debt and the slow resolution of non-performing loans.
In addition, the domestic economy is also faced with risks from tighter global financial conditions, rising protectionism and the failure of the Trans-Pacific Partnership.
But the monetary organisation notes that the government’s successful implementation of an ambitious reform agenda could raise growth potential and increase resilience to unexpected factors.
At the same time, rapid implementation of the Vietnam-EU and other bilateral trade agreements will help to boost exports and foreign direct investment.
The IMF noted that weakness in the oil sector continued in the first quarter of 2017, but the underlying growth momentum remains robust underpinned by strong manufacturing activity and FDI flow, strong domestic demand and a rebound in agricultural production.
The IMF commended Vietnam’s efforts in reforming State-owned enterprises, promoting private sector-led growth and strengthening public finances but warns of risks from the slow pace of banking reforms, rapid credit growth and limited fiscal and external buffers.
It recommends that Vietnam expand the scope of reforms to protect hard-won macroeconomic stability, raise growth potential and upgrade the growth model to enhance sustainability and productivity.
