HANOI- The World Bank on Monday forecast Vietnam’s gross domestic product (GDP) growth for this year at 6.1 percent , but warned that banks’ asset quality remained a concern.
The Southeast Asian country, a regional industrial hub, is targeting 6.5 percent GDP growth this year on expected external recovery and increased public investment, accelerating from last year’s expansion of 5.05 percent .
“With continued export growth and signs of a real estate recovery, domestic demand is set to firm up in the second half of 2024 as investor and consumer sentiment improves,” the World Bank said in a report.
However, asset quality has become a significant banking sector concern amid increasing non-performing loans (NPLs) and loan-loss coverage, the World Bank said, as NPLs have grown significantly from 1.9 percent in 2022 to 4.6 percent of total loans in 2023.
It said total problem loans could be as high as 7.9 percent if restructured loans and Vietnam Asset Management Company debts are included.
The World Bank also forecast Vietnam’s headline inflation rate at 4.5 percent this year, compared with inflation of 3.2 percent last year, as higher food prices are expected to persist.
Vietnam’s economic growth accelerated in the second quarter on robust exports, government data showed, but rising inflation remained a challenge for the Southeast Asian country.
Gross domestic product is estimated to have expanded to 6.93 percent in the second quarter from a year earlier, faster than a growth of 5.87 percent in the first quarter, the government’s General Statistics Office (GSO) said.
The economy expanded 6.42 percent in the first half of this year, the GSO added.
Vietnam, an important exporter of smartphones, electronics and garments, is seeking to shore up business activity after missing last year’s growth target because of weak global demand and power shortages.
“Vietnam’s socio-economic situation continues a positive trend, with each quarter being better than the previous one,” the GSO said in a statement.
“The country’s economy and society continue to face many difficulties and challenges, amid external risks and uncertainties … achieving the growth target of 6.0-6.5 percent in 2024 is a big challenge, requiring the joint efforts from all forces,” the GSO added.
Vietnam’s exports in the first half of this year rose 14.5 percent from a year earlier to $190 billion, while industrial production increased 10.9 percent from a year earlier, according to the GSO.
Earlier, Prime Minister Pham Minh Chinh said second-quarter GDP growth would exceed the first quarter’s pace, and said policy would continue to prioritise growth to meet this year’s growth target of 6.0 percent-6.5 percent.
Chinh said Vietnam would stick to its flexible monetary policy, with an aim of further cutting banks’ lending interest rates, reducing fees and boosting public investment.
The International Monetary Fund expects Vietnam’s economic growth to be close to 6 percent this year, supported by strong external demand, resilient foreign investment and accommodative policies, but has warned that downside risks are high.
The IMF said that if exchange rate pressures were to persist for longer it could lead to a larger pass-through to Vietnam’s domestic inflation, given easy monetary conditions.
Inflation pressures are building, with Vietnam’s consumer prices in June rising 4.32 percent from a year earlier, nearing the government’s inflation target ceiling of 4.5 percent for the year.
