Such growth, though lower than the government target of 6.7%, is a result of buoyant domestic demand, rebounding agricultural production and strong manufacturing, aided by a recovery in external demand.
In the meantime, inflationary pressures will remain modest, reflecting a stable core inflation, lower food and energy prices and diminishing administrative price hikes.
According to the World Bank’s biannual Taking Stock report, Vietnam’s growth over the medium term is projected to stabilise at around 6.4% in 2018-2019, accompanied by broad macroeconomic stability.
Sebastian Eckardt, the World Bank’s Lead Economist and Acting Country Director for Vietnam, said Vietnam’s economy is strong as a result of strong momentum in Vietnam’s fundamental growth drivers, namely domestic demand and export-oriented manufacturing.
He added that the current situation has provided good conditions in which to address critical structural bottlenecks to medium-term growth while solidifying macroeconomic stability and rebuilding policy buffers.
As the National Assembly and government have made a commitment to rein in the fiscal deficit, the report recommends a gradual, high-quality fiscal consolidation which strikes an appropriate balance between revenue mobilisation and the containment of expenditure.
On the revenue side, enhancing revenue administration to improve collections and lower the burden of compliance on tax-payers should be accompanied by changes in tax policy to enhance the mobilisation of domestic revenue.
Specific policy options include VAT reforms, increases in special consumption taxes for selected goods, broadening the corporate income tax base and the introduction of recurrent property tax.
On the spending side, the World Bank advises that Vietnam protect productive investment in infrastructure and human capital, while focusing on efficiency gains with regards to both capital and recurrent spending.
