Vietnam: Economic Context

Transcription

1 Vietnam: Economic Context Parliamentary Network Visit to Vietnam March 5 8, 218 Hanoi, Vietnam Jonathan Dunn IMF Resident Representative International Monetary Fund

2 Outline 2 IMF activities Economic achievements since 1986 Inclusive growth and poverty reduction Financial deepening Global integration Challenges of the day Fiscal space Credit and NPLs Productivity Demographic transition Environment

3 IMF Activities with Vietnam 3 Lending/program Active program engagement to support reforms from Policy consultation Excellent dialog with the government on policies and reforms Ambition of the government to make Vietnam a top performer in ASEAN and regionally has increased demand for policy advice and capacity building Capacity building and technical assistance Main areas in Vietnam: Monetary policy framework and reserves management, public finance management (GFS, Treasury operations, debt management), tax administration, tax policy, statistics (CPI and PPI, external statistics and FDI survey, national accounts)

4 Major milestones : Launched Doi Moi (economic renovation) program 1993: Normalization of relationship with the USA and international financial institutions 2: Signature of the USBTA with the USA 27: Joined the WTO 28-21: Challenging period for macroeconomic management 211: Introduced 3 pillars for economic reform and stabilizing the economy : Return to strong growth driven by domestic demand and FDI

5 Remarkable achievements over the past three decades. 5

6 6 Remarkable development in the decades since Doi Moi Vietnam: Real GDP Growth (percent change) Real GDP Growth (percent change) 5 4 Vietnam Advanced economies Emerging market and developing economies World Sources: IMF World Economic Outlook, GSO and Fund Staff Calculation

7 Growth has been broadly equitable and poverty has declined dramatically Vietnam: Poverty Reduction, (in percent) Poverty headcount ratio at $3.1 a day (211 PPP, percent of population) (or latest) 2 GSO-WB poverty rate 1 Rebasing Ethnic minorities Source: The World Bank. 2 Bangladesh Lao PDR Philippines Indonesia Ca mbodia Vietna m China Malaysia Thailand

8 After hyperinflation in the 198s and 199s, inflation has been tamed in recent years 1 Vietnam: CPI Inflation (year-on-year percent change) Headline Core Sources: GSO and Fund staff calculations

9 9 Transformation from one of the poorest countries in the world to a lower middle-income country GDP per capita (US$) Sources: IMF World Economic Outlook, GSO and Fund Staff Calculation

10 1 Financial deepening 25 Total assets of the banking system (in percent of GDP) 2 SOCBs Non-SOCBs Sources: SBV and Fund staff calculations

11 Rapid integration into the global economy 11 External Trade (Perent of GDP) 25 2 Non-FDI exports FDI exports Non-FDI imports FDI imports Sources: GSO and Fund staff calculations

12 Exports have shifted to manufacturing and high-tech products and markets are expanding in China, the EU and the US 12 Vietnam: Export by Commodities (In percent of total exports) Vietnam: Exports by destination (In percent of total exports) M Oil Machinery, transport vehicles Steel, chemical, metal products Other Sources: GSO and Fund staff calculations Agriculture Wood and paper Electronics and Telephone 18. United States Japan China EU ASEAN Other East Asia South Korea Rest of the world

13 13 One of the world s most attractive investment destinations Foreign Direct Investment (US$ billion, unless otherwise indicated) Committed Capital Disbursed capital Disbursed capital (% of GDP, RHS) Sources: MPI, SBV and Fund staff calculations

14 Challenges of the day. 14

15 Expansionary fiscal policy has resulted in high budget deficits and steadily rising public debt 15 Vietnam: Fiscal Balance (In percent of GDP) Fiscal balance Primary balance Est. Sources: Vietnamese authorities; and IMF staff calculations. Proj. Vietnam: Public and Publicly Guaranteed Debt (In percent of GDP) Foreign debt Domestic debt Total Sources: Vietnamese authorities; and IMF staff calculations. Est. Proj.

16 Declining revenue makes it hard to meet large needs for public investment 16 Revenue (In percent of GDP) Vietnam and ASEAN-4: Public Investment (In percent of GDP) Est. Proj. Philippines Indonesia Thailand Malaysia Vietnam proj. Note: 1/ ASEAN 4 includes Indonesia, Malaysia, Philippines and Thailand Sources: MOF and Fund Staff Calculation

17 17 Public debt higher than in peers Vietnam and ASEAN-3: Public Debt 1/ (In percent of GDP) Vietnam (216) Thailand (22) Phillipines (21) Indonesia (29) 28.6 Note: 1/ At the same level of Vietnam s GDP per capita in 216 (approximately US$ 2,2) Sources: IMF staff reports

18 Recent sustained high credit growth accompanied by a rising credit intensity of growth Credit growth Credit in % GDP (RHS) Credit growth (y/y) Vietnam: Credit Intensity of Growth and Inflation (in percent) 7.5 Credit intensity of growth 6. Inflation (1-year lag, RHS) Q1 22Q1 23Q1 24Q1 25Q1 26Q1 27Q1 28Q1 29Q1 21Q1 211Q1 212Q1 213Q1 214Q1 215Q1 216Q1 217Q Sources: SBV and Fund staff calculations

19 Legacy high NPLs are gradually being addressed 19 Impaired Loans (In trillion of Vietnamese dong, unless otherwise indicated) Impaired loans, of which: Total loans Impaired loans Classified as NPL Sold to VAMC Decision 78 loans Impaired Loan Ratio (Dec. 216) Impaired Loan Ratio (Jun. 215) Total banking sector 5, State-owned bank 2, Private sector bank 1/ 2, Sources: Data from Vietnam authorities and IMF staff calculations. 1/ Joint stock banks, joint venture banks, fully foreign-owned bank and branches.

20 2 Productivity has been declining Source: WB report: Vietnam 235

21 Demographic dividend is nearly spent and Vietnam will become one of the world s fastest aging societies 21 Source: UN

22 22 Environmental challenges Environmental and resource sustainability issues are macro-critical: Vietnam is vulnerable to natural disasters and climate change, and emissions are on the rise. The sustainability of growth is threatened by water, air and ground pollution; high vulnerability of the low-lying Mekong Delta to climate change and extreme weather; and unsustainable agriculture that results, inter alia, in soil salinization.

23 Thank you! 23