Vietnam Needs Investment to Spur 35-Year Low Growth, World Bank Says

(Bloomberg) -- Vietnam needs to boost public investment to help support an economy that’s set to grow at its slowest pace in 35 years amid the coronavirus pandemic, according to the World Bank.

The Washington-based lender estimates growth in the export-reliant nation will slow to 2.8% this year, Jacques Morisset, the World Bank’s lead economist in Vietnam, said in an interview Wednesday. An upcoming report from the bank estimates that if the government increases the execution rate of approved projects to 75% from 65%, it would inject about $4 billion into the local economy.

The World Bank’s growth projection is far lower than the government’s official target of 6.8%, although that could be revised in coming months after an advisory panel estimated the economy will likely grow 3%-4% in 2020. ​Vietnam’s second-quarter gross domestic product rose 0.36% from a year earlier, the slowest pace in at least a decade.

Vietnam’s Economy May Grow 3-4% in 2020, Advisory Panel Says

The upcoming World Bank report estimates growth will rebound to 6.7% in 2021.

Vietnam, which is in a prime position to accelerate foreign investment after successfully containing the virus earlier in the year, should develop protocols to make it easier for potential investors to get into the country, Morisset said. Authorities now require 14-day quarantines for any person entering the country. An easing of this requirement along with special measures, such as health monitoring for select investors, could help the nation lure more FDI, he said.

The government should focus on fiscal policies to help boost industries such as manufacturing, tourism and garments, which have taken a knock because of weak global demand and a slump in domestic consumption.

Morisset said he doesn’t think further interest rate cuts will be of much benefit to the economy, and could instead risk fueling inflation and weaken banks. The central bank has cut policy rates twice this year, and the government’s advisory council had suggested more easing.

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