Vietnam will be able to achieve the growth target of 6.7% for 2016, thanks to strong domestic demand and exports, says HSBC in a report released on January 5.

According to HSBC, exports will pick up to double-digit growth even as global growth remains lacklustre, thanks to new foreign investments, reflecting improvements in the business climate.

Meanwhile domestic demand should remain firm as a result of robust private spending.

HSBC says it sees no scope for a more expansionary fiscal policy, given the government’s tight finances, which combined with the above-mentioned factors leads the bank to maintain the 6.7% growth forecast for 2016.

Growth is expected to pick up slightly to 6.8% in 2017.

The bank expects inflation to rebound sharply in the second half of the year, prompting the State Bank of Vietnam to tighten its policy.

According to HSBC, Vietnam’s potential is no doubt great but numerous issues and obstacles remain if growth is to be sustained in the long run.

The bank says Vietnam needs to speed up the equitisation of State-owned enterprises and deepen financial sector reforms in order to reduce the risk of another boom and bust cycle triggered by faster growth in the future.