Vietnam’s economy is expected to grow at a moderate rate of around 5.3 percent this year and 5.4 percent in 2014, according to a report released by the World Bank (WB) in Vietnam on July 12.

The report forecasts that inflation will increase to about 8.2 percent by the end of the year.

In the report, WB experts said that Vietnam’s macroeconomic conditions continue to improve as its economy enters the third year of relative stability.

Inflation was 6.7 percent in June 2013. Central Bank reserves have more than doubled in the past two years. Meanwhile, Vietnam’s credit default swap was about 250 basic points in June 2013 compared to about 350 one year ago.

According to the report, in the first half of 2013, the country’s total export value saw a year-on-year increase of 16 percent. The foreign-invested sector accounts for 66 percent of total exports, up 25 percent from the first six months of last year.

In the same period, exports of mobile phones and spare parts became the country’s largest export item with a total value of 9.9 billion USD, surpassing traditional exports like crude oil, garments and footwear.

The report also cites the results of the ASEAN Business Outlook Survey by the Singapore Business Federation and the American Chamber of Commerce (Amcham). It says that Vietnam remains the most popular location for expansion within the ASEAN region.

However, the report also points out challenges Vietnam’s macro-economy has been facing, including slow structural reform, which it says, can reduce investors’ trust and badly affect the country’s growth prospects.

Restoration of macroeconomic stability and the tight credit policy of the State Bank of Vietnam have prevented the vulnerabilities from growing bigger, the report says.

According to the report, the establishment of the Vietnam Asset Management Company has been the most visible step taken by the Government to deal with bad debts.-VNA