The FINANCIAL — Economic growth in Vietnam has proven resilient despite weakening external conditions, driven mainly by strong domestic demand and a dynamic export-oriented manufacturing sector.
According to Taking Stock, the World Bank’s bi-annual economic report on Vietnam released, the pace of expansion is forecast to remain at 6.8 percent this year, higher than the projected figure of 6.3 percent for emerging markets in the East Asia and the Pacific.
Over the medium term, in line with the global trend, Vietnam will see a slower pace – 6.6 and 6.5 percent in 2019 and 2020, respectively. Inflation will remain muted at 4 percent as the result of tightening monetary policies.
Risks to the outlook have intensified and are titled to the downside, highlights the report. Given its high trade openness and limited fiscal and monetary policy buffers, Vietnam remains susceptible to external volatilities. Escalating global trade tensions could cause a falloff in export demands while tightening global liquidity could reduce capital inflows and foreign investment. Domestically, a slowdown in reforming state-owned enterprise and banking sectors could undermine growth prospects and create public sector liabilities.
In light of the recently ratified Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), the special section of this Taking Stock edition focuses on streamlining non-tariff measures to help boost Vietnam’s export competitiveness. This timely analytical work is a product of the Second Australia-World Bank Group Strategic Partnership in Vietnam (ABP2).
The report observes that while tariffs are rapidly declining, the number of non-tariff measures (NTM) is increasing. Vietnam’s average preferential tariffs have fallen from 13.1 percent in 2003 to 6.3 percent in 2015. In contrast, the number of NTMs has increased by more than 20-fold during the same period. International experiences show that poorly designed and implemented NTM could restrict trade, distort prices, and erode national competitiveness.
According to this report’s assessment, the NTM system in Vietnam remains complicated, opaque, and costly, resulting in high cost of compliance. One study estimates that the equivalent tariff rate that sanitary and phytosanitary measures Vietnam are imposing on imported goods is 16.6 percent compared to the average level of 8.3 percent for ASEAN countries.