World Bank lowers Vietnam's growth forecast amid global downturn

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Residential and commercial buildings stand in Hanoi

The World Bank has cut its growth forecast for Vietnam to 5.2 percent from 5.7 percent, saying the country is a rare case among Asia's emerging economies in that it does not have a strong banking system.

Regional banking systems are generally well-capitalized and profitable and non-performing loans are relatively low, but Vietnam is one of the exceptions, together with Timor Leste, the Washington-based lender said in a report Monday.

"In Vietnam, which has focused on fighting inflation the past year and a half, investment growth has seen a considerable slowdown the past year," the bank said, adding that the trend was partially reversing in the last part of the year now that the policy stance had become "more accommodative."

Vietnam's economic growth is expected to pick up to 5.7 percent next year, compared to a previous projection of 6.3 percent, the World Bank said in its East Asia and Pacific economic update.

Economic growth in the region may slow by a full percentage point from 8.2 percent in 2011 to 7.2 percent this year, before recovering to 7.6 percent in 2013. Tensions on international financial markets have eased in recent months, following developments in the Euro area and central bank action in Europe, the US and Japan, the World Bank said.

"Should conditions in Europe deteriorate sharply, the risks are high that developing economies might be affected," it added.

"Over the medium-term, increases in productivity in the East Asia and the Pacific, which is increasingly becoming a middle income region, will drive growth," said Bert Hofman, World Bank Chief Economist for East Asia and the Pacific. "Continued structural reforms, improvements in the business climate and investments in infrastructure and education systems will become more important," he said in a statement.

The Asian Development Bank cut Vietnam's growth forecasts last Wednesday.

The economy will expand 5.1 percent this year, compared with an earlier estimate of 5.7 percent, according to the Manila-based bank. It also reduced the country's inflation projection to 9.1 percent from 9.5 percent.

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