Vietnam's exports are not growing as fast as they used to due to a decline in global demand, a trend that analysts at HSBC have described as worrisome.
Given that 80 percent of the emerging economy depends on what it manages to ship to overseas markets, Vietnam may face difficulties when exports growth falls to 12 percent this year from 13.6 percent in 2014, based on a forecast by HSBC on Tuesday.
Although exports continued to expand by double-digits in recent years, growth has decelerated, particularly in shipments of crude, rubber, coal and rice, analysts at the bank said.
They also named low inflation as another challenge for Vietnam this year.
Inflation, a mainstay of the economy, has been easing. Lately there have even been discussions about the risk of deflation.
HSBC analysts said if inflation continues to fall, the economy may not grow fast enough to offset its widening fiscal deficit.
However, the biggest risk to Vietnam remains within its own economic structure, especially in how credit is allocated, HSBC analysts said.
Despite promises of reforms in the banking system as well as in the state-owned enterprise sector, progress has been slow, rather than systemic, they said
The state’s share of investment rose from 37 percent in 2011 to 40.4 percent in 2013. Its share of output on the other hand declined, from 32.7 percent to 32.2 percent.
“We are concerned about Vietnam’s long-term growth potential, especially if the most efficient sector of the economy – the domestic private sector – continues to be crowded out by the state,” the analysts said.
Vietnam's government aims for a 6.2 percent economic growth this year.