According to the World Bank
(WB), Vietnam’s GDP growth is expected to stay at around 6.5% in 2015, up from 6.5% previously projected.
On the sidelines of the launch of the World Bank “Taking Stock” report on Vietnam’s recent economic developments, Sebastian Eckardt, senior economist at the World Bank, talked about the outlook of the Vietnamese economy and the impact of the latest IMF
What has been the basis for the lift of the GDP growth forecast for Vietnam?
The upward revision of Vietnam’s GDP forecast for this year, from 6.2% to 6.5%, has mainly reflected stronger-than-expected consumption and investment growth. Components of domestic demand have picked up more than we had projected back in June.
What are your recommendations for the monetary policy that Vietnam should adopt?
Sebastian Eckardt, senior economist at the World Bank.
Vietnam’s macro-economic conditions are actually quite strong. There has been macro-economic stability, prices have been stable and inflation has been at record lows. This is good news.
That has allowed the State Bank of Vietnam (SBV) to maintain the current level of interest rates. Exchange rate pressures that emerged earlier this year were accommodated by three consecutive devaluations. That shows that the policy framework has been quite flexible in responding to changing circumstances.
In our opinion, it’s important that overall macroeconomic policies aim to increasingly rebuild policy buffers to safeguard against future shocks. It means that the combination of fiscal, monetary and exchange rate policies should aim to centrally achieve fiscal consolidation, reign fiscal imbalances.
On the monetary side, I think the current policies stand appropriately accommodated. But we do think that going forward combination of possibly more flexibility on the exchange rate as well as possible adjustments to the monetary policy may be needed, in the context of the volatile global financial market, including the uncertainty surrounding the timing of the Federal Reserve fund rate that is expected to have in the near future.
In your opinion, what will be the impact of the inclusion of the Chinese renminbi in the Special Drawing Right (SDR) basket exert on Vietnam’s debt repayment, trade activities and exchange rate?
Generally speaking, the inclusion of the renminbi in the SDR basket reflects the increasing importance of the Chinese economy, which is now the second largest in the world, in terms global financial architecture.
It was long anticipated that the renminbi would be included and it’s a welcome step.
I think the impact [of the move] on Vietnam’s economy at least in the short term is relatively limited. We don’t see any direct impact on the exchange rate or trade flows from that step.
Thank you very much!