Martin Rama, chief economist for the World Bank in Vietnam, said at a press briefing in Hanoi that Vietnam has navigated the global crisis better than expected, with the target for real GDP growth of 6.5 percent in 2010 an "easily attainable" one.
According to the bank's semiannual update on the East Asia region, a large budget deficit, rapid credit growth and moral suasion on state-owned enterprises pushed up Vietnam's investment rate to 42.8 percent of the GDP in 2009.
However, the report released on Wednesday said inflation had showed signs of accelerating, with prices rising 6.5 percent in 2009 as a whole partly from the devaluation of the dong and higher international commodity prices. The adjustment of energy prices to align them with international competitors was also a factor.
Both Rama and Vikram Nehru, World Bank chief economist for the region, suggested that Vietnam up its interest rate and "let the market do the work" in a bid to allow some reflow back into dong and away from dollars.
The World Bank report said that it would be hard for Vietnam to keep the inflation rate below the 7.5 percent as requested by the National Assembly.
It suggested that the nation focus on investing in physical and human capital to encourage a move up the value chain in production and exports
The report projected that the region would grow by 8.7 percent in 2010. The global lender had previously predicted 7.8 percent in November 2009.
"East Asia is leading the rest of the world out of the crisis," said Nehru on conference call from Tokyo.
He added that it was time for countries to move beyond the stimulus and allow the private sector to be "the main engine" for economic growth. "Reform is like riding a bicycle. You have to constantly reform otherwise you'll fall off."
Nehru also noted that within nations in the ASEAN region, there should be more efforts to streamline off-the-border trade barriers, increase trade in services, and adjust countries' migration policy, which can help nations take advantage of a moving skilled labor force.
The update also suggested East Asia and Pacific countries to move toward green technologies and energy efficiency but only countries with high investment can afford to turn over their capital stock in adaptation of greener technologies, Nehru said.