Growth is likely to bottom this year if the Vietnamese economy follows its normal pattern of the last two decades unless the government acts decisively and fast, a think tank has warned.

The Vietnam Academy of Social Sciences said in a report January that the pattern since 1989 has been for growth to bottom alternately in four-year and six-year cycles.

It is now in the four-year cycle and the previous trough occurred in 2009.

The previous lows had been in 1989, 1993, 1999, and 2003.

The best-case scenario this year would see GDP expand by 5.3 percent compared to 5.03 percent in 2012, the academy said.

Vietnam government has set a GDP growth target of 5.5 percent and hopes to contain inflation at below last year's 6.8 percent.

The academy said the economy would start recovering between 2013 and 2015, but would need much more time to return to a balanced and sustainable growth path.

“This period of transition thus needs a medium-term vision instead of too much focus on short-term fluctuations in the local and global economies."

The government needs to adopt clear policies to boost the economy right from the beginning of the year, it said.

It should cut value-added tax on necessities by 0.5-5 percent, and adopt the amendments to the income tax law right now instead of waiting until July, it said.

In November lawmakers amended the Personal Income Tax Law to provide relief to nearly 75 percent of taxpayers by raising the tax threshold to VND9 million (US$430) per month from the current VND4 million.

They will also be allowed to deduct VND3.6 million per month for each dependent compared to the current VND1.6 million.

The think tank also wants corporate income tax to be cut to 20 percent and value-added tax for small and medium firms halved to 5 percent.

The corporate tax currently stands at 25 percent, and the Ministry of Finance last month said it plans to cut that by 2 percentage points by 2014.

The academy wants the government to reduce lending interest rates, which are now between 15 and 17.5 percent.

According to figures from the Ministry of Investment and Planning, 51,800 businesses went bankrupt or closed or scaled down their operations last year.

January was the first month ever during which more businesses were dissolved than incorporated.