Vietnam to lead GDP growth among major Asia Pacific economies

This is an upgrade from World Bank’s April forecast when it pegged Vietnam’s growth at 5.3%, it said in a report released Tuesday.

The growth forecast for Vietnam exceeded that of the Philippines (6.5%), Malaysia (6.4%), and Indonesia (5.1%).

The World Bank lowered its forecast for China from 5% to 2.8%.

Growth in developing East Asia and the Pacific outside of China is forecast to accelerate to 5.3% this year from 2.6% last year.

Growth in the region has been driven by recovery in domestic demand, enabled by a relaxation of Covid-related restrictions, and growth in exports, the World Bank said in a press release.

China, which constitutes around 86% of the region’s output, uses targeted public health measures to contain outbreaks of the virus, inhibiting economic activity.

But the global economic slowdown is beginning to dampen demand for the region’s exports of commodities and manufactured goods.

Rising inflation abroad has provoked interest rate increases, which in turn have caused capital outflows and currency depreciations in some East Asia and Pacific countries.

These developments have increased the burden of servicing debt and shrunk fiscal space, hurting countries that entered the pandemic with a high debt burden.

“Policymakers face a tough tradeoff between tackling inflation and supporting economic recovery,” said World Bank East Asia and Pacific chief economist Aaditya Mattoo.

Better policies for food, fuel, and finance would spur growth and insure against inflation, he added.

Vietnam’s growth is expected to hit 6.7% next year, still among the highest in the region.