Vietnam is set to meet its target of 6.7 percent economic growth this year, and expects to see the same rate of expansion next year.
At the National Assembly’s opening session in Hanoi, Vietnam’s prime minister Nguyen Xuan Phuc highlighted the country’s fast growing economy. Manufacturing output rose 12.8 percent in the nine months through September from a year earlier.
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Meanwhile, foreign direct investment is rising, new factories are opening, and exports are increasing.
In July, Vietnam’s central bank cut its benchmark interest rate for the first time since 2014, giving the economy a further boost.
Do Ngoc Quynh, head of the treasury at the bank for investment & development of Vietnam in Hanoi said at the time:
These rate cuts will make it cheaper for businesses and individuals to borrow, so it will help spur loan demand and bolster consumption. Vietnamese companies still highly rely on bank lending. We just need to be mindful about how the loans will be used to avoid increasing bad debt.
Nguyen Thi Hong, deputy governor of the state bank of Vietnam, said on Saturday that the country was in a strong position to ensure fund availability for loans to companies.
With reserve levels at $45bn, he said that money will allow authorities “to step in to stabilize the money market when needed”.
The government plans to exert more control over imports to reduce the country’s $442m trade deficit while increasing domestic sales.
The government also “needs to ensure it can control inflation and continue to improve the investment climate for businesses,” said Vu Hong Thanh, the head of the National Assembly’s Economic Committee.
Inflation will average four percent next year.
Economists have warned, however, that Vietnam must not neglect its debt problem.
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“While the short-term outlook is pretty decent, risks are building,” Gareth Leather, senior Asia economist at Capital Economics in London, told Bloomberg last month. “In particular, we are increasingly concerned by the rapid increase in debt. Credit booms on the scale that Vietnam is experiencing are not sustainable over the long term.”
Private sector credit growth has increased by around 20 percent, while Vietnam’s banking system had about 345trn dong ($15.2bn) of unresolved bad debt as of December 31, 2016, according to the central bank.
Vietnam is not the only country in Asia forecast growth of more than six percent this year, with competition from emerging markets like China, India and the Philippines.
Yasuyuki Sawada, the chief economist at the Asian Development Bank (ADB) said last month:
Growth prospects for developing Asia are looking up, bolstered by a revival in world trade and strong momentum in the People’s Republic of China
The ADB raised its Developing Asia’s 2017 growth forecast to 5.9 percent from 5.7 percent in its latest Asian Development Outlook Update.