ADB lifts economic growth forecasts for Vietnam

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ADB lifts economic growth forecasts for Vietnam

With Vietnam’s economic expansion expected to exceed expectations for 2015 and 2016, the Asian Development Bank (ADB) has raised its growth forecasts for the country from the original outlooks made earlier this year. The ADB had forecast Vietnam’s gross domestic product to expand by 6.1 percent in 2015 and 6.2 percent in 2016, but the figures have been revised to 6.5 percent and 6.6 percent, respectively, according the latest Asian Development Outlook Update 2015.

Sensible pro-growth monetary and fiscal policies are helping to restore macroeconomic stability, and recent policy reforms are boosting business confidence, the ADB said at the press meeting to release its flagship report in Hanoi on Tuesday.

“Vietnam’s improving economic growth performance is being driven by a number of factors, particularly stronger output from the manufacturing sector, rising consumer spending, and macroeconomic stability,” ADB country director for Vietnam Eric Sidgwick said at the meeting.

The report notes that manufacturing output growth is particularly strong, increasing by 9.9 percent in the first half of the year as foreign-invested factories spur the production of goods for export.

This growth is likely to continue with foreign direct investment disbursements reaching record levels in the first half of the year, according to the ADB.

Construction accelerated to grow by 6.6 percent during the first six months of 2015 owing to a modest recovery in the property market and public investment in infrastructure.

The report underlines that the Vietnamese financial sector also “appears to be picking up momentum” after some challenging years, with credit growth set to surpass official targets during 2015.

Government policy has also been aided by lower global commodity prices which have helped to contain price growth, lift disposable incomes and lower business costs, according to the report.

Despite these achievements, Vietnam does face some growing macroeconomic challenges, the ADB warned.

“Slowing economic growth in China, one of Vietnam’s largest trade and investment partners, may dampen trade prospects while continued low global commodity prices will reduce export earnings for key sectors like oil and agriculture,” the report remarks.

In order to mitigate such challenges, it will be vital for the country to “continue to deepen structural and financial sector reforms, [increase] productivity growth and [boost] Vietnam’s international competitiveness,” Sidgwick advised.

The ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration.

Established in 1966, it is owned by 67 members, 48 of which are from the region.

In 2014, ADB assistance totaled US$22.9 billion, including the co-financing of $9.2 billion.