* PM sees inflation in check, faster growth
* Inefficiency, debt, weak sentiment remain
* China maritime actions hurt development - PM (Releads, adds quotes, details)
By Ho Binh Minh
HANOI, Oct 20 (Reuters) - Vietnam expects economic momentum to pick up next year but inefficiency, bad debt and weak domestic sentiment will keep a lid on growth, the country’s prime minister said on Monday.
The Southeast Asian nation expects economic growth of 6.2 percent in 2015, faster than the targeted 5.8 percent this year.
After a long struggle with runaway prices, Vietnam plans to keep inflation at 5 percent in 2015, compared with a government projection of below 5 percent this year, Prime Minister Nguyen Tan Dung told the National Assembly in a televised opening session.
“The macro economy and major economic balances are not sustainable,” Dung said, citing a high state budget deficit, fast rising debt and slow growth in aggregate demand and bank credit.
“Economic growth has made a step towards recovery but the business environment and productivity, efficiency and competitiveness of the economy remain low.”
Dung’s comments are in line with those of many independent economists, who say strong exports and a booming manufacturing sector are driving an economy otherwise constrained by structural woes, such as a wasteful state sector, stubborn bad debts and subdued domestic spending.
After growing 5.42 percent in 2013, the economy has been expanding faster this year. Third quarter annual growth quickened to 6.19 percent from 5.42 percent in the second quarter and 5.09 percent in the first three months, data showed.
Others are not quite so bullish, however. ANZ bank in a report last week maintained its forecast of annual growth at 5.6 percent this year and the World Bank in July cut its forecast of 2014 GDP growth to 5.4 percent from 5.5 percent. That was based on weak consumption, low confidence in the private sector, high rates of non-performing loans in banks and debt exceeding equity in state-owned enterprises.
Dung said the $171 billion economy was also facing a slow recovery in the real estate market and involved in a territorial dispute with China which has strained bilateral ties.
China’s action has “seriously threatened peace, stability and the socio-economic development of the country”, he said.
Some economists reckon the effects of the dispute in May - when China moved a $1 billion oil rig unannounced into a stretch of the South China Sea that Hanoi claims is its exclusive economic zone - could trim 1 percent off growth this year.
Assembly deputies are scheduled to hold a closed-door hearing on the South China Sea development during the session.
The consumer price index in September rose 2.25 percent from December 2013, the slowest year-to-date pace in a decade, Dung said. Earlier this month, the World Bank revised down its forecast for Vietnam’s inflation in 2014 to 4.5 percent, from 6.0 percent projected previously.
Bad debts rose to 3.9 percent of bank loans at the end of August from 3.61 percent at the end of 2013, according to the government report to the legislature.
Foreign debt is forecast to rise to 39.9 percent of gross domestic product in 2014, from 37.3 percent in 2013, while the annual trade surplus was revised up to $1.5 billion, from a surplus of $0.5 billion forecast previously, the report said.
Parliament will discuss and may approve the government’s socioeconomic targets for 2015 during its autumn session due to end in late November.
Vietnam’s VN Index gained slightly on Monday after Dung’s speech, closing the morning session up 1.1 percent at 591.76 points, after six straight sessions of falls. (Editing by Martin Petty and Jacqueline Wong)