Hanoi (VNA) - Stronger export growth and a continued rise ininvestment suggest Vietnam’s GDP growth will go back to above 6.5 percent in2017, after a slowdown to 6.2 percent in 2016.

The information was given at an event launching the latest Economic Insight2017 - South East Asia Q2 report, organised by the Institute of CharteredAccountants in England and Wales (ICAEW) in Hanoi on June 21.

Priyanka Kishore, ICAEW economic advisor & Oxford Economics lead economist,said that rising foreign direct investment (FDI) levels are fundamental to Vietnam’sgrowth. In 2016, FDI went up by 9 percent to 24.4 billion USD, affirming the country’slong-term market growth and its positioning as a low-cost source for textilesand other industrial products in the region.

The growth of the private sector should continue as infrastructure programmesare put in place to enable expansion in transport, communications and energysectors. Vietnams’ medium-term growth is on track to reach an above-trend 6.7percent in 2017-2018 period.

However, risks to the forecast growth continue to pose substantial concerns.The fiscal deficit remains high, with ratios of public and foreign debt to GDPalready 64.7 percent and 53.6 percent at the end of 2016. Measures available tocorrect the existing deficit, such as budget cuts and tax increases, riskslowing GDP growth – and may not even address the deficit if such measures fallon public investments instead of consumption.

In addition, the banking sector was undercapitalised by almost 10 billion(4.6 percent of GDP) at end 2016 as per Moody’s calculations.

This can leave banks vulnerable if non-performing loans rise further, as somebanks’ ratio of loans to capital has already been lowered following a rapidloan growth period.

Mark Billington, regional director, ICAEW South East Asia, said

“Vietnam’s growing role as an outsourcing and low-cost food and industrialsupplier will continue to drive robust export growth. We expect domestic demandto remain the primary driver of growth, given the rapid but unstable recoveryin external global trade.”

“ASEAN nations will need to focus on providing a more attractive businessinvestment environment. More fiscal stimulus to support domestic demand is oneway this could be achieved,” Mark added.

Economic Insight - South East Asia is produced by Oxford Economics, ICAEW’spartner and economic forecaster.

Commissioned by ICAEW, the report provides its 147,000 members with a currentsnapshot of the region’s economic performance. It undertakes a quarterly reviewof South East Asian economies, with a focus on Indonesia, Malaysia, thePhilippines, Singapore, Thailand and Vietnam.

Founded in the UK in 1880, ICAEW is a world-leading professional membershiporganisation headquartered in London with offices internationally includingKuala Lumpur, Singapore, Vietnam and Indonesia. ICAEW connects withover 147,000 chartered accountants worldwide, providing this community ofprofessionals with the power to build and sustain strong economies.-VNA