The World Bank forecasts that Vietnam's economy will grow by 5.5% in 2022
With the assumption that Covid-19 is relatively well controlled domestically and globally, Vietnam's GDP this year is forecasted to increase by 5.5% by the World Bank.
The growth forecast of the World Bank is currently lower than the target set by the Government of 6.5-7%, as well as the expected figures provided by organizations such as HSBC (6.5%), and Standard Chartered (6.5%).
According to the World Bank's January 13 report, Vietnam's service sector will gradually recover as consumers and investors regain confidence, while the manufacturing and processing industries benefited from stable demand from the US, EU and China. The agricultural sector is expected to continue to grow at the rate of 2020-2021, making a small but steady contribution to growth..
The budget deficit and public debt are expected to remain with an expected debt-to-GDP ratio of 58.8%, much lower than the regulatory ceiling.
Besides, the World Bank assessed that Vietnam's economic recovery process will be supported by a looser fiscal policy, at least in the first half of 2022. However, this organization has not commented on Vietnam's 2-year support package because at the time of reporting, the support package has not been announced in terms of scale and content.
However, Vietnam's growth prospects still contain many risks, especially in the face of unclear developments of the pandemic. The outbreak of new variants could lead to the re-imposition of social distancing measures, affecting economic activities. Weaker-than-expected domestic demand may affect Vietnam's recovery.
In addition, many of Vietnam's trading partners are facing shrinking fiscal and monetary room, which could limit their ability to continue to support their economies if the crisis persists. This could slow the global recovery and weaken demand for Vietnamese exports.
The World Bank believes that prudent response policies can reduce these risks. Fiscal policy measures will support aggregate domestic demand, including temporarily reducing value-added tax (VAT) rates and increasing spending on health and education.
Support for businesses and affected people also needs to be larger and more focused. Social protection programs must identify the right groups of people in need and need to be implemented more effectively to deal with the heavy and unequal social consequences of the crisis. Rising risks in the financial sector also need to be closely monitored and proactively addressed.
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