“While global growth moderates, Vietnam shows its resilience. Economic activity in Vietnam moderated somewhat in the first three quarters of 2016 due to the impact of a severe drought on agricultural production and slower industrial growth. But macroeconomic stability has been maintained and inflationary pressures remain subdued.”
This remark is stated in the East Asia and Pacific Update released recently by the World Bank (WB) in Hanoi.
According to the WB, while Vietnam continues to reduce poverty, the decline in agriculture poses short-term risks. The livelihoods of households that rely on agriculture for income are particularly vulnerable. For the medium-term, the outlook remains positive. But easing macroeconomic vulnerabilities and sustaining higher medium-term growth would need a bolder implementation of structural, fiscal and banking sector reforms.
Growth in developing East Asia and Pacific is expected to remain resilient over the next three years. However, the region still faces significant risks to growth, and countries need to take measures to reduce financial and fiscal vulnerabilities.
The report expects China to continue its gradual transition to slower, but more sustainable, growth, from 6.7 per cent this year to 6.5 per cent in 2017 and 6.3 per cent in 2018. In the rest of the region, growth is projected to remain stable at 4.8 per cent this year, and rise to 5 per cent in 2017 and 5.1 per cent in 2018. Overall, developing East Asia is expected to grow at 5.8 per cent in 2016 and 5.7 per cent in 2017-2018.
Among other large economies, prospects are strongest in the Philippines, where growth is expected to accelerate to 6.4 per cent this year, and Vietnam, where growth this year will be dented by the severe drought, but will recover to 6.3 per cent in 2017. In Indonesia, growth will increase steadily, from 4.8 per cent in 2015 to 5.5 per cent in 2018, the report says, contingent on a pickup in public investment and the success of efforts to improve the investment climate and increase revenues. In Malaysia, however, growth will fall sharply, to 4.2 per cent in 2016 from 5 per cent last year, because of weak global demand for oil and manufactured exports. The report also assesses that growth will remain buoyant in Cambodia, Lao PDR and Myanmar.
Ms Victoria Kwakwa, World Bank Vice President for East Asia and Pacific, said, the outlook for developing East Asia and Pacific remains positive, with weakness in global growth and external demand offset by robust domestic consumption and investment. The long-term challenge is to sustain growth and make it more inclusive, including by shrinking gaps in income and access to public services and improving infrastructure across the rest of the region; reducing persistent child malnutrition; and harnessing the potential of technology to stimulate financial inclusion.
The report says, continued low commodity prices will benefit commodity importers and keep inflation low across most of the region.
According to the WB, immediate priorities include advancing reforms in its corporate sector and bringing credit growth under control in China; reducing the build-up of domestic and external financial risks in the other large economies; maintaining fiscal buffers and broadening revenue sources across the region, particularly for commodity producers; and addressing risks to fiscal sustainability in Mongolia and Timor-Leste.
Over the longer term, the report highlights four areas where policy measures can promote inclusive growth. First, it recommends that China build on its past success in reducing poverty by improving access to basic public services for the rural population, and for the still growing number of migrants to the cities. Second, other countries in the region need to fill infrastructure gaps by rebalancing public expenditure, increasing public-private cooperation and improving the efficiency of public investment management.
Third, the report urges policymakers to address widespread malnutrition. It recommends coordinated measures across a range of areas, including early childhood development programmes and micronutrient interventions.
Finally, the report recommends that countries harness the potential of technology in transforming financial services and increasing financial inclusion. The region is technologically advanced, with a high level of mobile phone penetration, but lags in access to financial services. To reap the gains from financial innovation, countries will need to strengthen legal and regulatory frameworks and enhance consumer protection.
PV
Vietnamese
