HSBC’s forecast for the GDP growth of Vietnam in 2013 has been slashed from 5.5 percent to 5.1 percent, according to its Marco Vietnamese economics report, released on Monday.

The less optimistic prediction is due to soft global commodity prices, which have weighed on agriculture and energy exports, and sluggish credit growth, the report reads.

Vietnam’s economic activity continues to be hammered by weak domestic demand. The HSBC manufacturing PMI contracted in May, dragged down by sluggish domestic activity. Retail sales, CPI and trade data also point in the same direction.

“This suggests that while growth is still resilient at around 5 percent, the recovery process is very uncertain and has proved to be more sluggish than anticipated,” it concludes.

The report illustrates that May’s economic indicators paint a mixed picture of the economy, with positive signs from FDI attraction emerging against declining indexes.

Specifically, while trade, retail sales, HSBC manufacturing PMI, and CPI all point to anemic growth of about 5 percent for 2013 (relative to a historical average of 7 percent), the registered FDI print shows that the country remains competitive and continues to attract healthy inflows, according to the report.

As of the end of May, the total FDI registered capital had risen to US$5.1 billion, up 23.5 percent year on year.

Most of the capital has been channeled into the manufacturing sector, providing much-needed employment and investment in times of fiscal and monetary austerity and weak domestic demand.

The report also noted that the government’s approval of the Asset Management Corp to buy financial institutions’ bad debts represents progress.

“Approved on May 22, the AMC is crucial for Vietnam to move forward with its banking sector restructuring efforts.

“While the AMC’s limited capital base has raised doubts about the efficacy of the program, its establishment is an important signal to the market that the government is serious about the reform process,” the report reads.