Vietnam Aims to Lower Fiscal Deficit, Bad Debt in Next 5 Years

Tuan Minh

14:27 09/11/2016

BizLIVE - Vietnam is targeting to bring down the country’s key financial indicators in the coming years as the new leadership seeks to fix consequences of years of rapid growth.

Vietnam Aims to Lower Fiscal Deficit, Bad Debt in Next 5 Years

Vietnam aims to narrow fiscal deficit to 3.5% of GDP by 2020. Photo: Internet

The Vietnamese National Assembly, the country’s supreme legislative body has approved a national economic restructuring plan for 2016-2020 under which many critical financial indicators will be brought down to ensure a sustainable growth path after years of
The legislators on November 8 voted to lower the country’s budget deficit to 3.5% of GDP by 2020, against above 5% over the past few years.
The ceilings for public debt and foreign debt are maintained at 65% and 50% of GDP, respectively, while the cap for government debt is revised upwardly to 54% of GDP, four percentage points higher than the previous five-year plan.
Notably, the bad debt ratio in the banking system is aimed to fall to below 3%, versus a 17% rate identified in 2012 and around 2.6% currently. Lending rates are set to go down to the average level of the ASEAN-4 group.
The stock market will play an important role in the national economy, to ease pressure on the money market. The share market capitalization is projected to be equal to 70% of GDP by 2020 while the portion of the bond market is aimed at 30% of GDP.
The parliament asks the government to finish revamping the three pillars of the economy, which are public investment, state-owned enterprises (SOEs) and banking system by 2019, to switch to other sectors.
The government is also required to consider letting loss-making SOEs to go bankrupt to stick to market conditions.
The National Assembly earlier approved the GDP growth target for 2017 at 6.7%, compared to 6.3-6.5% estimated for this year. Exports are set to grow 6-7%, lower than a 10% expansion in recent years given souring global demand.

TUAN MINH