The State Bank of Viet Nam must step up efforts in the management of the country's banking sector and prepare for all possible scenarios for timely and effective interventions, according to the World Bank.

Carolyn Turk, WB country director in Viet Nam, said the global economy will likely enter a period of turbulence while it's struggling with slow growth, decreased demand, high inflation and central banks around the world tightening credit.

Turk's comment was made in the aftermath of an event in which three US banks: Silicon Valley Bank (US' 16th largest bank), Silvergate Bank and Signature Bank, one after another, collapsed in a week. She said the ramifications of such an event will likely follow within a short time and consequences be felt across the global financial market, which commands policymakers to pay attention and plan for necessary interventions.

She said there are many similarities that can be observed between the above-mentioned US banks and the Vietnamese banking system, especially in smaller banks.

It highlighted the importance of a strong grip on the financial sector to ensure the central Government stays up-to-date with current developments and relevant data, and is able to respond in a timely manner, Turk added.

Viet Nam's economic growth is projected to ease to 6.3 per cent in 2023 from a robust 8 per cent last year, as services growth moderates and higher prices and interest rates weigh on households and investors, according to the World Bank's report released on March 13.

Service has become the largest sector of Viet Nam's economy, increasing from 40.7 per cent of GDP in 2010 to 44.6 per cent in 2019. The employment share of the sector also rose from 29.6 per cent in 2010 to 35.3 per cent in 2019. As the largest source of employment, it has absorbed a significant portion of the workforce from the agriculture sector.

However, labour productivity and efficiency in Viet Nam’s service sector remain low compared to other countries, reaching US$5,000 per worker in 2019 in comparison to $20,900 in Malaysia, $9,300 in the Philippines and $7,300 in Indonesia. — VNS