While Vietnam’s economic performance continues to improve, further structural reforms that allow greater participation of local firms in global value chains is needed to enable the economy to reach its full growth potential, the Asian Development Bank (ADB) said in a report released on Tuesday (March 24).
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| Illustrative photo. People shopping at a market in Hanoi |
“Better economic performance in the major industrial economies -- particularly the US, Vietnam’s biggest export market -- will help to spur export growth, although this positive effect will be partly offset by slowing growth in the PRC (Mainland China),” said Tomoyuki Kimura, ADB Country Director for Vietnam. “Vietnam is also expected to be a net beneficiary of lower global oil prices which will increase disposable incomes and lower business costs.”
The Outlook highlights that while Vietnam’s economic performance slowly improves, a number of structural factors continue to limit its ability to reach its full growth potential.
In the short term, priority should be placed on strengthening the banking system and outlining a clear strategy to resolve non-performing loans. Growth will also be supported by new laws to guide divestment of state-owned enterprises and accelerate their commercialization.
Lifting economic growth over the longer term, however, will rely on Vietnam’s ability to undertake deeper structural reform, in particular to support local firms’ integration into global value chains.
“To strengthen SME’s capacity to participate in global supply chains, efforts will be needed to strengthen inter-agency coordination, particularly in the formulation and implementation of SME policies," Kimura said. “Greater consultation with the private sector would also help to identify constraints that inhibit links with production networks. Industry-specific strategies that support industry clusters and economies of scale are also needed.”