The update to the Asian Development Bank (ADB)'s flagship annual economic publication, Asian Development Outlook (ADO) 2013, maintains the forecast for Vietnam 's gross domestic product (GDP) growth at 5.2 percent in 2013.
The ADO Update, launched in Vietnam's capital Hanoi on Wednesday, expected gradual progress in dealing with non- performing loans (NPLs) to slightly lift growth to 5.5 percent next year.
The inflation forecast is revised down from ADO 2013 to 6.5 percent for this year because food price inflation has decelerated more quickly than expected. Inflation is projected to step up to average 7.2 percent for 2014 due to monetary easing and increased liquidity.
The ADO Update commended the positive steps taken by the State Bank of Vietnam (SBV) to deal with NPLs in the banking sector, in particular the formation of the Vietnam Asset Management Company ( VAMC).
The update, however, noted success of VAMC could depend on other supporting legislative and policy reforms not under direct mandate of the SBV. The update also expressed concerns over delay to implementation of improved loan classification and provisioning standards.
Despite policy rate cuts, growth in lending was constrained by banks' impaired balance sheets, concerns over the financial health of borrowers, a sagging property market, and weak demand for credit. The ADO Update suggested progress on NPL resolution would allow further lowering of interest rates and increased flows to productive sectors of the economy.
According to the ADB director, gradual progress in resolving NPLs will improve business sentiment, and as this happens, policy stimulus, including the cuts in interest rates this year, could gain traction in boosting credit and GDP growth.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration. Established in 1966, it now has 67 members, including 48 from the region. In 2012, ADB assistance totaled 21.6 billion U.S. dollars, including co- financing of 8.3 billion dollars.