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ANALYSIS

MATTERS improved budgetary execution and enhanced
targeting. They stressed that once the recovery
is firmly underway, gradual fiscal adjustment
should center on revenue mobilization to help
TO CONSIDER create space for priority social and infrastructure
spending and support greener and more inclusive
growth. Directors noted the need for continued
efforts to upgrade fiscal policy frameworks to
The IMF has recently completed its Article IV safeguard fiscal sustainability.
consultation with Vietnam. Directors also recommended maintaining
an accommodative monetary policy stance,
while remaining mindful of underlying banking
sector vulnerabilities. They emphasized that
he International Monetary Fund (IMF) as collapsing tourism receipts and weaker corporate support for viable firms should be
holds bilateral discussions with mem- remittances are only partially offset by subdued gradually phased out and regulatory forbear-
T bers, usually every year, under Article imports and lower income payments. Despite ance normalized. Directors underscored that
IV of its Articles of Agreement. A staff team some economic scarring, a strong recovery financial risks should be closely monitored
visits the country, collects economic and finan- is expected in 2021 as normalization of domes- and problem loans addressed in a timely man-
cial information, and discusses with officials tic and foreign activity continues. Fiscal and ner. Medium term objectives include enhancing
the country’s economic developments and monetary policies are expected to remain private debt restructuring frameworks and
policies. Upon its return to headquarters, the supportive, although to a lesser extent than further strengthening banks’ capital position
team prepares a report that forms the basis of in 2020, and inflation is projected to remain in the context of adopting Basel II requirements.
discussions by the Executive Board. Accordingly, close to the authorities’ target of 4 per cent. Noting the staff team assessment that Viet-
the Executive Board of the IMF has concluded The IMF’s Executive Directors noted that nam’s external position was substantially
the Article IV consultation with Vietnam. the COVID-19 pandemic disrupted a prolonged stronger than warranted by fundamentals and
Vietnam began 2020 on the heels of a period of high growth and improvements in desirable policies, Directors called for steadfast
prolonged period of high growth. The last living standards. They commended authorities reform efforts to remove the remaining barriers
three decades of market-oriented reform sup- for their decisive and comprehensive response to private investment and enhance social safety
ported a structural transformation from agri- to the pandemic, which, supported by strong nets. Directors stressed the importance of
culture to a modern economy based on FDI- fundamentals and policy buffers, has been structural reforms to improve the business
led manufacturing, lifting Vietnam from one instrumental in ensuring the economy’s environment, enhance productivity, and boost
of the poorest countries in the world to lower resilience. Directors noted that risks to the the post-pandemic potential for growth. They
middle-income status. In recent years, growth outlook are tilted to the downside and stressed concurred that priority should be given to
averaged 7 per cent, and the emphasis on the need for measures to limit permanent reducing labor skill-mismatches, promoting
“leaving no one behind” boosted living stan- scarring and promote sustained, inclusive, digital transformation, and ensuring a level
dards, contributing to notable progress and greener growth. playing field, particularly for small and medium-
towards the Sustainable Development Goals. IMF Directors underscored the need for sized enterprises (SMEs). Directors welcomed
Economic activity remained strong and fiscal measures geared towards protecting work- continued efforts to improve economic insti-
inflation stable in 2019, with the rate of new ers and vulnerable households, including through tutions and strengthen governance. %
business creation reaching a six-year high.
Fiscal consolidation efforts helped contain
public and publicly-guaranteed debt to 43 per VIETNAM: SELECTED ECONOMIC AND FINANCIAL INDICATORS, 2016-2021
cent of GDP, well below the 65 per cent statutory Projection
limit. Despite moderating trade flows on
account of US-China trade tensions, the current 2016 2017 2018 2019 2020 2021
account surplus rose to 3.8 per cent of GDP as Output
a result of sharply slowing imports of raw Real GDP (% change) 6.7 6.9 7.1 7.0 2.9 6.5
materials and intermediate goods, record Prices (% change)
tourist arrivals, and large remittance flows. CPI (period average) 2.7 3.5 3.5 2.8 3.2 4.0
Vietnam’s external position in 2019 was assessed
to be substantially stronger than warranted CPI (end of period) 4.7 2.6 3.0 5.2 0.2 3.7
by the fundamentals due to structural features. Core in!ation (end of period) 1.9 1.3 1.7 2.8 1.0 2.3
Following the onset of the COVID-19 crisis, Saving and investment (% of GDP)
decisive measures were taken to limit the Gross national savings 26.6 25.7 28.2 30.4 28.6 29.3
health and economic fallout. Early and con- Gross investment 26.3 26.3 26.3 26.6 26.4 27.0
certed efforts helped ease lockdown restric- Private 20.4 20.5 20.8 21.0 20.2 21.4
tions and contain the associated policy support Public 5.9 5.8 5.5 5.6 6.2 5.6
package relative to other countries. Fiscal
policy focused on temporary support to firms Memorandum items
and vulnerable households, while monetary GDP (VND trillion at current market prices) 5,639 6,294 6,998 7,654 7,912 8,630
policy was eased to maintain abundant liq-
uidity in the banking system. Real GDP growth GDP ($ billion) 252.1 277.1 304.0 329.5 340.8 364.1
in 2020 was 2.9 per cent, among the highest Per capita GDP ($) 2,693 2,929 3,182 3,416 3,500 3,704
in the world. The current account surplus is
projected to narrow to 2.2 per cent in 2020, Sources: Vietnamese authorities; IMF staff estimates and projections.

24 | VIETNAM ECONOMIC TIMES | APRIL 2021