Hanoi (VNA) – Vietnam’s economy has performed well in 2019, withGDP expanding by an estimated 6.8 percent, public debt reduced by nearly 8percentage point of GDP since 2016, and a trade balance surplus for fourth yearin a row, according to the World Bank (WB)’s report released on December 17.

The international financial institution described the results as remarkable inthe context of global downturn.

The latest Taking Stock, the WB’s bi-annual economic report on Vietnam,emphasises the resilience of the Vietnamese economy. GDP growth has continuedto be driven by a strong external sector with exports expanding by about 8percent in 2019, nearly four times faster than the world average.

The country has also remained an attractive destinationfor foreign investors, with foreign direct investment (FDI) inflows averaging 3billion USD per month. In addition, private consumption has emerged as animportant contributor to GDP growth as the result of an expanding middle-incomeclass and rising wages. Private firms also increased investment by 17 percentduring the same period.

Prospects for the short to medium term are good as the World Bank forecasts aGDP growth rate of around 6.5 percent over the next few years. Vietnam’seconomic fundamentals appear robust, and the government has built some fiscalspace through its prudent fiscal policy.

However, the country is not completely immune to external shocks asdemonstrated by the gradual decline in export growth from 21 percent to 8percent between 2017 and 2019. This decline in export growth has been even morepronounced in non-US markets, up by only 3.6 percent during the first 11 monthsof 2019. Greenfield FDI has also slowed by about 30 percent over the past twoyears, even if it has been compensated by an increase in mergers andacquisitions.

To account for these external risks, and to bring an additional engine ofgrowth to the economy, the report recommends making the development of a strongand dynamic private sector a priority. However, many firms operating in thedomestic market face severe obstacles preventing their expansion, with the mostpertinent being access to credit.

WB Country Director for Vietnam Ousmane Dione said that addressing thefinancing constraint of firms should receive the greatest attention from policymakers if Vietnam wants to continue on its trajectory of rapid and inclusivegrowth and reach high-income status in the coming decades.

The report advocates for the development of well-functioning capital markets asa foundation for Vietnam’s future prosperity. As experienced by many countriesin the world, including in East Asia, well-functioning debt and equity marketscan help finance the domestic productive sector and complement lending from thebanking system and diversify sources of financing. They also contribute to theresilience of the financial system as a whole by ensuring deeper liquidity anddiversifying risks.

The report also suggests five areas policy makers should focus on to advancethe development of the capital markets: modernising the legal and regulatoryfoundation of the capital markets; improving governance and informationdisclosure; broadening the investor base; developing innovative products; andstrengthening the government’s role in the development of long-term finance./.