World Bank: Vietnam Growth, Positive Signs

October 10, 2013 Posted by Vietnam Briefing Reading Time: 2 minutes

Oct. 10 – According to the World Bank, Vietnam has seen improvements to its macroeconomic performance over the past two years despite such growth being tempered by structural problems in the banking and state-owned enterprise (SOE) sectors.

This comes as good news as Vietnam saw its lowest growth levels since 1999 at 5.2 percent just last year. Further, the World Bank predicts that over the medium-term growth will remain moderate if there are no major changes to the country’s financial and SOE sectors.

While still positive, Vietnam’s GDP growth has declined over the past few years. However, this trend looks poised to change as, during the second quarter of 2013, the country saw a growth rate of 5 percent. It is predicted that the country will see a GDP growth of closer to 5.3 percent for the entire year.

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GDP is expected to increase slowly over 2014 and 2015 to reach around 5.4 percent. In 2012, the GDP growth topped out at 5.2 percent, while it reached 6.2 percent in 2011.

Part of the GDP problem arose this year when the country saw a 10.5 percent increase in the number of businesses that were reported to have to either close, liquidate or temporarily suspend their operations. To combat this, the government has taken a number of steps to offset this trend of declining GDP growth which includes cutting interest rates and reducing tax rates.

The country saw headline inflation decrease from 23 percent in 2011 to just 7.3 percent by July of 2013.

In 2012, Vietnam also saw a trade surplus for the first time since 1992 which is still continuing. The improved situation is having a knock-on effect upon the State Bank of Vietnam. As a result, it has strengthened its foreign exchange reserves from 1.6 months of import cover in 2011 to around 2.8 months by the beginning of 2013.

The country has also seen a great improvement in its current account deficit, rising from a deficit of 11 percent in 2008 to a record surplus of 5.9 percent in 2012.

Further, after seeing a drop during 2010-2011, Vietnam’s stock market has risen almost 18 percent in 2012 and even saw a further 19 percent increase throughout the first seven months of 2013.

Further positive signs were seen with regard to Vietnam’s exports. Total export value grew 14 percent during the first seven months of 2013. For comparison, in 2012, there was a growth rate of 18 percent and a 34 percent growth in 2011.

The World Bank attributes this positive export performance to the foreign invested sector that makes up two-thirds of Vietnam’s total exports.

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