IMF Predicts Vietnam’s Economy Has Soft Landing in 2019

Diep Nguyen

11:28 17/07/2019

BizLIVE -

Inflation is expected to pick up slightly in 2019 on the back of administered price increases but should remain below the authorities’four percent target.

IMF Predicts Vietnam’s Economy Has Soft Landing in 2019
Recently, International Monetary Fund (IMF) released the report in which it gave out some recommendations for Vietnamese policymakers.
According to IMF, trade tensions and financial volatility affecting emerging economies in 2018 were also felt in Vietnam, including through a stock market correction. Nevertheless, the economy has remained resilient to date and growth reached a 10-year high of 7.1 percent in 2018. 
The expansion is broad-based, fueled by healthy growth in incomes and consumption of the growing and urbanizing middle class, a strong harvest and surging manufacturing sector. Inflation averaged 3.5 percent in 2018. 
The strong economic momentum is expected to continue in 2019, aided by competitive labor costs and other strong fundamentals, including a diversified trade structure, and recently signed free trade agreements which are spurring reforms. However, a soft landing of growth is expected, to 6.5 percent in 2019 and over the medium term, reflecting weak external conditions. Inflation is expected to pick up slightly in 2019 on the back of administered price increases but should remain below the authorities’four percent target.
Macroeconomic policies have been tightened in recent years: A reduction in the budget deficit and strict limits on new government guarantees and robust growth during 2016-18 have contributed to reducing public debt to 55.5 percent of GDP at end-2018, from 60 percent at end-2016. 
The State Bank of Vietnam has continued to reduce credit growth, but liquidity continued to be ample in 2018, aided by external inflows and the growing capital market. The SBV is guiding banks to adopt Basel II standards in 2020 and developing plans to recapitalize systemic state-owned commercial banks. 
The external position in 2018 was substantially stronger than warranted by fundamentals. The authorities intervened in both directions to keep the Dong within a narrow band and reserve accumulation continued.
Reforms continue along a wide front: the monetary and fiscal systems are being gradually modernized, and blocks of shares in large state enterprises continue to be offered for sale.
The fight against grand corruption since 2016 has resulted in significant sentences, a new anti-corruption law has been approved, a PIMA has been completed and the AML/CFT system is about to be reviewed. 
But the list of reforms is even longer and the strong economy provides an opportunity for more ambitious reforms to level the playing field for the domestic private sector and increase investment by reducing administrative and licensing procedures and trade barriers. IMF staff remains engaged in a wide-ranging capacity development program with Vietnam.

DIEP NGUYEN

Tin liên quan

Cùng dòng sự kiện