Although economic growth was improving, the World Bank warned that Viet Nam was still performing below its potential, due to slow-moving structural reforms, especially in the banking sector and SOEs. — VNS Photo Ngoc Ha

HA NOI (Biz Hub) — The Vietnamese economy is set to grow by 6 per cent this year, according to the East Asia and Pacific Economic Update released yesterday morning by the World Bank.

The rate is 0.5 per cent higher than the ban k's projection last October.

After some turbulence in mid-2014, Viet Nam's economic performance rebounded and year-end growth exceeded expectations.

At the heart of this comeback was stronger macro-economic fundamentals, solid foreign direct investment (FDI) in manufacturing and exports from the sector, and key business climate improvements.

The report said inflation will be moderate this year because of low global energy and food prices, and a gradual recovery in domestic demand.

It said strong exports and robust remittances would keep the current account in surplus, albeit at a diminished level as stronger domestic economic activity stoked import growth.

Fiscal deficit would decline to under four per cent of GDP by 2017, underscoring the need for fiscal consolidation over the medium term, together with a credible plan to strengthen the finances of State-owned enterprises (SOEs) and the State-owned banking sector to preserve public-debt sustainability.

Although economic growth was improving, the World Bank warned that Viet Nam was still performing below its potential, due to slow-moving structural reforms, especially in the banking sector and SOEs.

It said the country still faced risks in its medium-term outlook, which remained mostly on the downside.

For example, weak global prices and other agricultural products might adversely affect rural incomes and consumption and widen the urban-rural gap. Falling oil prices could also put additional pressure on budget revenues.

Global growth remained sluggish and subject to much uncertainty, and might dampen Viet Nam's export and FDI inflows.

The report also spoke of opportunities for Viet Nam.

It said emerging trade agreements would provide opportunities for enterprises to reach out to bigger and richer markets.

Besides, domestic reforms, including medium-term fiscal consolidation, further improvements in the business climate and more credible and visible SOE and banking sector reforms would send important signals to domestic and international investors and lay the groundwork for stronger future growth, the report said. — VNS