The latest forecast economic growth improves from 5.4 percent last year, according to the WB.

The positive outlook is largely due to the country’s “ongoing macroeconomic stability and continued strong performance of the foreign-invested manufacturing export sector,” the WB said on its website.

Positive macroeconomic conditions contributed to Vietnam’s improved sovereign risk ratings, enabling US$1 billion of government bonds to be issued on international capital markets on favorable terms.

“Vietnam’s potential for much more rapid growth can only be realized if substantial progress is made in addressing distortions such as in the state enterprise and banking sectors, that tax the economy’s efficiency and productivity,” Victoria Kwakwa, WB country director for Vietnam, said in a statement.

“Stepping up this reform agenda and strengthening the business environment are critical for moving forward.”

The Taking Stock report, titled “An Update on Vietnam’s Recent Economic Developments – December 2014,” provides an outlook by leading WB economists on the Vietnamese economy.

The report finds that underlying the broad pattern of economic recovery, the performances of foreign-invested and domestic firms remain dichotomous.

The foreign-invested sector continues to be a significant source of growth, while the domestic private sector remains subdued, as reflected in the rising number of domestically-owned businesses that have closed or suspended operations.

Over the medium term, Vietnam’s macroeconomic outlook is good, with continued modest GDP growth and a further consolidation of macroeconomic stability.

The outlook, however, is subject to two key risks.

The relatively slow progress of the state-owned enterprise and banking sector reforms could adversely impact macro-financial conditions, whereas the adverse turn of events in the global economy could undermine Vietnam’s growth prospects, given the relatively large size of the export sector, according to the report.

“Credit growth continues to come in below target, hampering the State Bank of Vietnam's efforts to carry out credit expansion to support economic growth,” the report states.

The government has taken some important measures in 2014 to improve business conditions, which are expected to bear fruit from 2015 onward.

The government issued Resolution 19 (March 18, 2014), which prioritizes shortening the time for the processing and completion of administrative procedures, reducing administrative costs, and strengthening transparency and accountability of state administrative agencies.

The report has a special section on Financial Sector Assessment, which summarizes the major findings of the recent Financial Sector Assessment Program (FSAP), which the Vietnamese government invited the WB and the International Monetary Fund to initiate in July 2012, according to the United Nations international financial institution.

The FSAP provides a comprehensive framework to identify financial system vulnerabilities and develop appropriate policy responses, the WB said on its website.

The Vietnamese government has announced a comprehensive reform program designed to address the problems faced by the financial and corporate sectors, including corporate and financial distress, and a slowdown in GDP growth.

The recommendations provided by the FSAP include recapitalization plans, the workout of nonperforming loans, regulatory and other reforms, and the temporary extension of the safety net.

Tuoi Tre News - December 4, 2014