“Despite the drop in mining and oil output, Vietnam’s economy continues to perform well, driven by its twin engines of export-orientated manufacturing and rising domestic consumption”, said Eric Sidgwick, ADB Country Director for Vietnam. 

“Manufacturing expanded by 10.5% in the first half of the year as new foreign-invested factories ramped up production, while the services sector continued to pick up steam as a result of rising retail trade, growing bank lending and a 30% jump in tourism arrivals.” 

Vietnam’s economic growth is expected to rise in the second half of the year, buoyed by further increases in foreign direct investment and exports, domestic credit growth, a further recovery in agriculture from the 2016 drought and accelerating disbursements of capital expenditure on national infrastructure programmes.

The report stressed that while Vietnam’s economy is performing reasonably well against a challenging back-drop, several issues will need to be addressed to ensure growth remains sustainable.

It forecasts a downward revision in Vietnam’s economic growth to 6.3 percent in 2017, and 6.5% in 2018 as a result of an 8 percent contraction in mining and oil output in the first half of the year. 

Economic experts said while recent progress in trimming the budget deficit is commendable, it has also led to a drop in capital spending which if not rebalanced could erode Vietnam’s long-term growth performance. For Vietnam’s fiscal consolidation to be ‘growth-friendly’, the authorities may usefully focus on adopting additional taxation measures while trimming non-core public expenditures such as administrative expenses which have crowded-out infrastructure in recent years.

Source: vov.vn