Vietnam’s economic expansion will increase twofold year on year to 5.5 percent this year provided the coronavirus is kept at bay, the World Bank said in a press release on Thursday, quoting its economic update 'Taking Stock.'

“Vietnam’s economic recovery is likely to accelerate in 2022 as GDP growth is expected to rise to 5.5% from 2.6% in the year just ended,” the global lender forecast.

Assuming the COVID-19 pandemic will be brought under control at home and abroad, the forecast envisions that Vietnam’s services sector will gradually recover as consumer and investor confidence firms, it said.

The Vietnamese manufacturing sector will benefit from steady demand from the United States, the European Union, and China.

The fiscal deficit and debt are expected to remain sustainable, with the debt-to-GDP ratio projected at 58.8 percent, well below the statutory limit.

The outlook, however, is subject to serious downside risks, particularly the unknown course of the pandemic, the bank warned.

The emergence of new coronavirus variants may prompt renewed social distancing measures, thereby dampening economic activity.

“Weaker-than-expected domestic demand in Vietnam could weigh on the recovery,” the World Bank noted.

The global recovery could slow down and demand for Vietnamese exports could weaken as many trading partners are facing dwindling fiscal and monetary space, potentially restricting their ability to further support their economies if the health crisis persists, the bank said, adding that careful policy responses could mitigate these risks.

Fiscal policy measures, including temporary reduction of VAT rates and more spending on health and education, are likely to support aggregate domestic demand.

“Support for affected businesses and citizens could be more substantial and more narrowly targeted,” the bank suggested.

“Social protection programs could be more carefully targeted and efficiently implemented to address the severe and uneven social consequences of the crisis.

“Heightened risks in the financial sector should be closely monitored and addressed proactively.”

Entitled ‘NO TIME TO WASTE: The Challenges and Opportunities of Cleaner Trade for Vietnam,’ this ‘Taking Stock’ edition argues that greening the trade sector should be a priority.

An important driver of Vietnam’s remarkable economic growth over the past two decades, trade is carbon-intensive – accounting for one-third of the country’s total greenhouse gas emissions – and polluting, the World Bank commented.

More needs to be done to respond to mounting pressures from main destination markets, customers, and multinational companies for greener products and services even when Vietnam has started to decarbonize activity associated with trade, it said.

“Trade will be a key component of Vietnam’s climate actions in the years to come,” said Carolyn Turk, World Bank country director for Vietnam.

“Promoting greener trade will not only help Vietnam follow through on its pledge to reach net zero emissions in 2050 but will also help it keep its competitive edge in international markets and ensure trade remains a critical income and job generator.”

The report recommends that the government act on three fronts: facilitate the trade of green goods and services, incentivize green foreign direct investment, and develop more resilient and carbon-free industrial zones.

‘Taking Stock’ is the World Bank’s bi-annual economic report on Vietnam.

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