HANOI—Vietnam expects higher economic growth over the next five years, driven by strong exports and foreign investment as the Southeast Asian nation integrates further into the global economy.

The country targets an economic growth rate of between 6.5% and 7.0% a year during the 2016-2020 period, up from an average annual growth rate of around 5.9% for the past five years, Prime Minister Nguyen Tan Dung said Tuesday at the opening of a National Assembly meeting.

Growth in the country slowed to its recent low of 5.25% in 2012 from expansion of more than 7% during the previous decade, due mostly to weak global demand and high levels of nonperforming loans in the local banking system.

However, Vietnam has remained one of the best performers in Asia and its economic growth has been gaining momentum thanks to strong foreign investment inflows and exports. Growth is expected to be above 6.5% this year, up from 5.98% last year.

Economists said the momentum will continue now that the country has signed several free trade agreements with such important markets as the European Union and South Korea. The country and 11 other countries, including the U.S. and Japan, have also concluded talks on the Trans-Pacific Partnership trade agreement, in which Vietnam is expected to be the biggest beneficiary.

“The TPP, when taking effect, will facilitate our socio-economic development, boosting exports and investment and will result in higher economic growth,” Mr. Dung said. “We are confident that Vietnam can overcome any challenges that may arise and make full use of the TPP, helping accelerate its process of industrialization and modernization.”

Vietnamese economists have forecast that the TPP would lift Vietnam’s gross domestic product by $23.5 billion in 2020 and by $33.5 billion in 2025, according to the Ministry of Industry and Trade. The garment and textile industries will be among those that benefit most, it said.

Economist Can Van Luc, with the Bank for Investment and Development of Vietnam, said the government’s economic growth target for the next five years appears to be reachable. But he added that there are factors that will make it difficult for the government.

“Economic growth in emerging markets is forecast to remain slow over the next two or three years, and this would have adverse impacts on Vietnam,” Mr. Luc said. “Exports to these markets, as well as investment and remittances from them, will decline.”

He said other immediate factors that may hurt Vietnam’s economy include a possible interest rate increase by the U.S. Federal Reserve, low crude oil prices and Vietnam’s fast-rising public debt.

Mr. Dung said Tuesday that public debt is expected to increase to 61.3% of the GDP by the end of this year. This is up from 59.4% at the end of last year.

The National Financial Supervisory Commission said earlier this month that Vietnam will face challenges controlling its public debt in 2016. Revenue from import and export taxes will decline as the effects of the free-trade agreements Vietnam has signed begin to take hold, it said, adding that revenue from crude oil won’t likely recover in 2016.

By Vu Trong Khanh - The Wall Street Journal - October 20, 2015