World Bank cuts forecast for Vietnam's economic growth

October 07, 2014 | 09:33

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Sandeep Mahajan, head economist at the World Bank Office in Vietnam, said that economic growth would likely be only 5.4% this year, missing the government's target of 5.8%.

Sandeep Mahajan, head economist at the World Bank Office in Vietnam

However, in a press conference held on October 6, Mahajan also said that Vietnam still has three more months to improve the forecast. Since Vietnam's growth depends on exports, it can benefits from the recovery of the world economy. Even though Purchasing Managers Index was lowered recently, it is still over 50, an expansion in the manufacturing sector.

Mahajan also said that the restructuring of state-owned enterprises was going slower than what the World Bank had expected. However, he showed understanding by saying that a successful equitisation process has many factors.

Due to the impacts of economic downturn, investors are reluctant to buy shares, putting more pressure on enterprises.

According to Mahajan, Vietnamese authorities should be more active in making information about the process public. Transparency is another matter that needs to be worked on if Vietnamese authorities want to speed up the restructuring process, he said.

He added that Vientam's economy has two kinds of growth. The first is strong and comes from FDI and the second, weaker one comes from domestic companies. This, along with a high trade deficit, has hampered Vietnam's overall growth. According to him, authorities must focus on the development of local firms to fix the problem.

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