The World Bank (WB) expects Vietnam’s economic growth to hover around 6-6.2 percent in 2015, underpinned by further recovery in domestic demand, robust private consumption and investment growth.

In its updated report on Vietnam’s recent economic developments released on July 20, the WB said the outlook for the country’s economic growth is positive, adding that the Purchasing Managers’ Index (PMI) computed by HSBC has remained above 50 for 22 continuous months while the consumer confidence index stayed at 140.2 in May, well above its long-term average of 135.

Despite recent loosening of monetary policy, this year’s inflation will remain low, fluctuating at 2.5 percent on account of low global energy and food prices, the WB said.

The fiscal deficit is forecasted to be adjusted by cutting spending to avoid further increases in public debt. The bank also expects the trade surplus to narrow significantly in 2015 due to a combination of weakening exports and sustained import growth stoked by stronger domestic economic activities and investment demands.

Meanwhile, emerging trade agreements will provide opportunities for Vietnamese enterprises to attract more foreign investment, and diversify and promote trade through reaching larger and richer markets, the biannual report says.

However, WB Senior Economist Sebastian Eckardt underlined certain problems in Vietnam’s economic growth, including the rapid increase of public debt in recent years and weakening external trade balance causing the current account to move into a deficit in the first quarter of 2015.

Progress on structural reforms has been mixed, especially with regards to the restructuring of State-owned enterprises (SOEs) and reform of the banking sector. SOE equitisation progress has slowed down in 2015, with only 29 SOEs being equitised of the set target of 289 SOEs this year.

Lead Economist of the WB Office in Vietnam, Sandeep Mahajan said, despite banking reform advances, especially in mergers and acquisitions, efforts to resolve bad debts have been hampered by the absence of an enabling legal framework. Meanwhile the capital base of the Vietnam Asset Management Company is too small to actually resolve bad debts.

In a section on Vietnam’s labour market, the WB report says the job landscape in the country has shifted dramatically over the last 25 years. Jobs in Vietnam were once characterised entirely by family farming, collectives and SOEs. Over time, employment has shifted towards industrial production and services, household businesses outside agriculture, and private domestic and foreign-owned firms.

WB experts also urged the country to boost labour productivity to improve its competitiveness amidst the context of international integration.-VNA