VietNamNet Bridge – The Asian Development Bank has maintained its 5.2% GDP growth forecast for Vietnam in 2013 and said gradual progress in settling non-performing loans will prompt its economy to grow by 5.5% in 2014.

ADB forecast 5.5% GDP growth for Vietnam in 2014.

At its launch of the 2013 Asian Development Outlook update in Hanoi on October 2, ADB economist Dominic Mellor explained the 5.2% growth the bank forecast for Vietnam early this year remains unchanged due to the country’s weak consumer demand and shrinking export markets.

However, the economy will grow by 5.5% next year if the central bank’s measures to settle NPLs in the banking sector prove effective.

The Vietnam Asset Management Company (VAMC) has been established in an attempt to support commercial banks burdened with huge amounts of debts.

“Creation of VAMC is very positive but its success could depend on strengthening the legislative framework for dealing with secured assets, which will require strong inter-ministerial coordination and collaboration,” said Tomoyuki Kimura, ADB Country Director for Vietnam.

“Implementation of improved loan classification and provisioning standards would have reduced risks to the banking system and improved investor sentiment,” he said.

Despite recent policy rate cuts, the credit growth is constrained by banks’ impaired balance sheets, concerns over the financial health of borrowers, a sagging property market, and weak demand for credit.

The bank predicted progress on NPL resolution would result in further rate cuts and increased flows to productive sectors of the economy.

“As this happens, policy stimulus, including the cuts in interest rates this year, could gain traction in boosting credit and GDP growth,” said Kimura.

The inflation forecast is revised down from ADO 2013 to 6.5% for this year because food price inflation has decelerated more quickly than expected. Inflation is projected to step up to average 7.2% for 2014 due to monetary easing and increased liquidity.

Source: VOV