Vietnam’s economic growth is expected to slow to 6.8% this ​year from an expansion of 8% last ‌year, the World Bank said on Friday.

The country’s outlook remains solid, but risks remain elevated in the ​near term, the bank said in a ​statement.

“Softer global conditions are making Vietnam’s external ⁠environment more challenging, with the oil shock ​adding to the downside risks,” WB director for ​Vietnam, Mariam J. Sherman, said.

Vietnam targets annual GDP growth of at least 10% for this year and the ​rest of the decade.

The country is facing ​inflationary pressures triggered by the Iran war, leaving April inflation ‌higher ⁠than the government’s target of 4.5%.

The WB forecasts Vietnam’s 2026 inflation at 4.2%.

Vietnam’s banking sector has come under funding strains with credit growth ​outpacing deposit ​mobilisation, the ⁠WB said.

A prolonged Middle East conflict could depress Vietnam’s exports and exacerbate ​banking sector and currency pressures amid ​high ⁠corporate leverage and limited foreign exchange reserve cover, it said.

The WB urges Vietnam to shift its ⁠growth ​model from factor accumulation and ​bank-led finance to productivity-driven growth, deeper capital markets and higher-quality ​FDI.