WB lowers Vietnam’s GDP growth forecast to 2-2.5 percent this year
Hanoi (VNA) – Vietnam’s GDP growth forecast for
this year has been lowered to 2-2.5 percent, according to the World Bank's October 2021 Vietnam Macro Monitoring.
Vietnam's GDP in the third quarter of 2021
decreased by 6.2 percent from the same period last year, the sharpest decline
since Vietnam announced its quarterly GDP, the WB estimated.
Given the sharp contraction
of the GDP in the third quarter and depending on the strength of the economic
rebound in the fourth quarter, GDP growth for 2021 is projected to be in the 2
percent to 2.5 percent range, well below the WB's August forecast of 4.8 percent, it
said.
Labour market conditions
worsened substantially, reflecting the adverse economic impacts of the lengthy
lockdown in major economic centres.
As the number of new COVID-19
infections started to fall, Hanoi and several provinces eased stringent
restrictions so that mobility, industrial production index and retail sales
started to recover although they remained lower than a year ago.
The merchandise trade balance
improved as import growth slowed while foreign direct investment (FDI) commitment grew for a third month,
suggesting foreign investors remain confident in the longer-term potential of
the economy.
Inflation remained subdued
amid weak domestic demand while the Vietnamese dong experienced further nominal
appreciation in the domestic official market. Credit growth decelerated due to
weakening credit demand associated with slower economic activities but was
comparable to pre-pandemic rates as banks continued to provide preferential
loans and forbearance to support businesses affected by the pandemic, according
to the WB.
The year-on-year budget balance remained in surplus over the
past nine months despite posting another monthly deficit in September, mainly
driven by a sharp fall in revenues. The resumption of economic activities after
a prolonged social distancing is facing obstacles as can be seen from the
experiences of other countries in the world. Reactivating manufacturing
factories and businesses in the services sector will face potential product and
labour shortages, it said.
To ease logistical constraints,
the WB recommended that the Government of Vietnam continue testing and vaccination
on a large scale and encouraging labour mobility should be prioritised.
The authorities should also adopt a more expansionary fiscal
policy and use the various fiscal tools available to support the economic
rebound, including easing procedural rigidities in the budget to spend the
planned current budget, accelerating the implementation of planned public investment,
and expanding social protection to households and to formal and informal
workers, it said./.