## 1. An Export-Oriented Growth Model ## Source details **Canonical URL:** [1. An Export-Oriented Growth Model](https://www.imf.org/-/media/files/publications/cr/2025/english/1vnmea2025001-source-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1vnmea2025001-source-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1vnmea2025001-source-pdf.pdf.json) --- ### Context and recent economic developments - Growth: - Growth reached 7.5 percent y/y in 2025:H1. - The economy remained resilient in 2025, building on the strong recovery in 2024, with domestic demand picking up in 2025:H1 on the back of accommodative policies, front-loading of exports (in anticipation of higher U.S. tariffs), and large one-off government spending. - Inflation and external: - Headline inflation accelerated to 3.6 percent in June, but remained below the target (4½-5 percent). - The current account (CA) reached a historical surplus of 6.6 percent of GDP in 2024. - The VND depreciated by 5 percent against the U.S. dollar in 2024; FX reserves declined due to capital outflows partly reflecting the interest rate differential with U.S. rates. - Errors and omissions in 2024 amounted to 6.9 percent of GDP. - The VND continued its depreciation against all major trading partners’ currencies thus far in 2025. - Domestic demand and public spending: - Public consumption’s contribution to GDP growth surged in 2025:H1, partly reflecting government spending on institutional reform and several national events. ### Export-oriented growth model: key findings - Exports and FDI: - Exports and FDI have been key pillars in Vietnam’s growth strategy. - Over the last two decades, economic growth averaged 6½ percent as Vietnam transitioned from a low to middle-income country and poverty declined sharply. - Exports plus imports have averaged almost 170 percent of GDP in the last decade. - The U.S. and China are the largest trade partners. - The economy has benefited from large FDI inflows of over 4 percent of GDP a year. - Current account behavior: - The CA balance has been volatile with an average of 2 percent of GDP—ranging from 2-4 percent deficits in some years to 4-6 percent surpluses in others. - Since Covid-19, the average CA surplus has increased despite relatively weak export growth, largely reflecting relatively weaker domestic demand amid several shocks including Covid-19, real estate and financial sector turbulence. - The large increase in the CA surplus in 2023 was mainly driven by a sizable contraction in imports; trade rebounded in 2024 but import levels remained relatively weak reflecting subdued domestic demand. - Policy implication: - Recent external uncertainty and volatility underscore the benefits of gradually rebalancing the growth model, with a greater contribution from domestic demand and more diversified trade. ### Fiscal and monetary developments - Fiscal: - Revenues rebounded to 17.6 percent of GDP in 2024, from a record low in 2023, but remained below the historical average. - The 30-percent increase in public wages in July 2024 was partly offset by weaker public investment (5.9 percent of GDP) reflecting persistent bottlenecks in disbursement. - The fiscal deficit is estimated at 1.5 percent of GDP with public and publically guaranteed (PPG) debt falling to 31.3 percent of GDP. - Preliminary data for 2025:H1 suggest strong revenues and higher expenditures, including from public investment, national celebrations, and costs related to the ongoing institutional reform. - Monetary and credit: - The State Bank of Vietnam (SBV) has maintained policy rates near record lows since early 2023 to support the recovery. - SBV conducted FX intervention (FXI) as depreciation pressures mounted from late 2024 but has refrained from spot FXI since early 2025 and adjusted the center of the ±5-percent exchange rate (ER) band. - Bank credit growth accelerated to 15 percent in 2024 and 19 percent in June 2025 y/y; the stock of credit reached 136 percent of GDP and the credit-to-GDP gap remained positive in 2024. - Corporate bond issuances have continued to rise but remain below pre-2022 levels; maturities coming due in 2025:H2 and a limited, interconnected investor base pose risks. - The recently amended securities law aims to provide impetus to the market, though risks remain. ### Outlook, scenarios, and transmission of U.S. tariff shock - Baseline assumptions: - Baseline projections assume additional U.S. tariffs on Vietnam would average 20 percent from August 2025 and tariffs on other countries announced as of July 24. - Direct value-added embedded in exports to the U.S. is about 10 percent of GDP. - Projections: - Growth is projected to decelerate to 6.5 percent in 2025 and 5.6 percent in 2026. - The CA surplus is projected to narrow to 4 percent of GDP in 2025 following a sharp drop in export growth. - Inflation is projected to remain broadly stable in 2025 below the 4½-5-percent target, and fall in 2026. - Scenario risks: - Downside scenario: if the higher 40 percent tariff applies to a larger share of Vietnam’s exports (e.g., goods with local content below 50 percent), economic growth could be lower by an additional 0.2-0.6 percentage point in 2025-26. - Upside scenario: trade reallocation gains could be larger if trade policy uncertainty subsides; successful implementation of planned infrastructure projects and comprehensive structural reforms could boost medium-term growth by more than 2 percentage points. - Transmission channels: - Trade channels: direct effect dominates given exports to the US account for about 30 percent of total exports. - Financial channels: lower exports could reduce FDI and other financial inflows and increase exchange rate pressures. - Second-round effects: lower global demand could hurt exports to all major markets and hit business sentiment and activity. ### Risks (quantitative and qualitative) - Dominant downside risks (Annex III): - Higher global economic policy uncertainty, tightening global financial conditions, deterioration in external demand, weaker FDI, increased country-risk premium, FX pressures, and tighter domestic financial conditions. - Fast-rising credit growth could lead to an increase in NPLs. - Geopolitical risks could trigger spikes in commodity prices, leading to inflationary pressures and tighter financial conditions. - Natural disasters and climate change present additional risks (by 2100, climate change could severely impact more than 12 percent of the population and reduce growth by 10 percent). - Upside possibilities: - Early payoffs from trade diversification and confidence effects from announced reforms could raise growth. ### Monetary and exchange rate policy: discussion and recommendations - Exchange rate and monetary stance: - Greater ER flexibility is critical to help the economy adjust to the trade shock. - Monetary policy should remain flexible and data dependent, closely monitoring incipient inflation pressures; core inflation remains above pre-pandemic levels as the output gap turned positive. - If a more adverse shock materializes, fiscal policy should take the lead to cushion the growth impact given available fiscal space while allowing the ER to act as a shock absorber. - Further lowering domestic rates could exacerbate capital outflows and pressures on the ER and inflation; if global interest rates decline and the output gap becomes negative with inflation in check, some monetary easing could be considered. - Temporary FXI could be warranted in cases of disruptive ER pressures but should be used sparsely given low FX reserves and high uncertainty. - Modernization of framework and operational recommendations: - Pending SBV law reform presents an opportunity to accelerate the transition to an inflation targeting regime by strengthening SBV’s operational independence, streamlining the monetary policy toolkit, improving consistency, and incorporating forward-looking elements. - Specific operational recommendations include: - Establishing an interest rate corridor with a floor rate by introducing a deposit facility. - Clear communication of policy changes and objectives. - Phasing out deposit and lending rate caps. - Replacing credit growth ceilings (partially eliminated) with a sound macroprudential framework that promotes appropriate levels of capital and quality assets among banks. ### Fiscal policy: stance, projections, recommended role if growth slows - Near-term fiscal stance and outlook: - Fiscal deficit projected to widen to 3.3 percent of GDP in 2025 driven by expenditure. - Fiscal impulse estimated at almost 2 percent of GDP. - Most spending increase reflects one-off factors, including costs of institutional reform (including early retirement packages) and spending related to national celebrations, and the full-year effect of the 30 percent wage increases granted in July 2024. - With these effects mostly lapsing in 2026, the fiscal deficit is projected to narrow to 2.3 percent of GDP. - Over the medium term, deficits are expected to remain around 2 percent of GDP. - Public debt is projected to gradually decline over the medium term, with an overall low risk of sovereign distress (Annex VIII). - Institutional reform fiscal impact: - Early retirement packages estimated to cost 1 percent of GDP during 2025-26, though most frontloaded in 2025. - Savings from a lower wage bill are estimated at 0.9 percent of GDP annually. - Role for fiscal policy if growth slows: - Given available space, fiscal policy can provide additional support if economic growth slows down markedly. - Expected higher public investment and lower tax revenues (reflecting automatic stabilizers) will provide some relief as the economy slows in 2026. - Further fiscal support could be provided if downside risks materialize with a sharper-than-expected slowdown. - Recommended targeted measures include: - Accelerated implementation of public investment and further strengthening social safety nets. - Targeted and temporary tax measures for hardest-hit sectors (e.g., accelerated depreciation and loss carrybacks). - If growth declines sharply, additional temporary fiscal support could include cash transfers for vulnerable households or other targeted support for distressed but viable SMEs—while ensuring it does not induce inflation risks. - Extraordinary support measures should not impede structural adjustment and should limit fiscal costs and risks through strong governance and transparency guardrails. - Medium-term fiscal framework (MTFF) recommendations: - Improve credibility of medium-term fiscal plans and link them to the annual budget with realistic projections. - Enhance revenue mobilization, including by expanding the tax base. - Integrate comprehensive risk assessment in the MTFF (including from SOEs and PPPs). - Upgrade fiscal transparency. - Given planned increases in borrowing for investment, revise fiscal rules and strengthen debt management; a lower debt ceiling—e.g., 50 percent of GDP—could be a prudent medium-term anchor. ### Financial sector: recent trends, risks, and reform priorities - Recent performance and vulnerabilities: - Banks experienced solid profits in 2024. - On-balance-sheet NPL ratio declined from 5.9 percent in September 2023 to 5.3 percent in March 2025—despite remaining above the 2.3 percent level in 2022. - Banks' capital adequacy ratios improved modestly to 10.4 and 12.1 percent for public and private banks, respectively, but remain below peers. - The loan-to-deposit ratio exceeds 100 percent, increasing reliance on wholesale funding. - Liquid assets accounted for only 7.8 percent of total assets as of June 2024. - Corporate vulnerabilities remain high: private debt is elevated and a significant share of corporate debt remains at risk, especially in the real estate sector. - Channels and risks from trade shocks: - Banks could be affected through direct exposure to exporters and the broader economic slowdown. - Risks include worsening liquidity conditions, increased FX volatility impacts, and tariff-induced financial stress in export-related sectors and SMEs leading to higher NPLs and provisioning needs. - Recommended priority actions: - Increase liquidity and capital buffers to manage uncertainty. - Intensify monitoring of banks, including through more robust and regular stress testing and an early warning framework. - Ensure rapid credit growth does not lead to deterioration in asset quality. - Crisis preparedness and legal reforms: - Establish a formal financial stability function to improve inter-agency coordination with the Ministry of Finance (MoF). - Develop an emergency liquidity assistance framework and resolution financing mechanism aligned with international standards. - Ensure the deposit insurance agency is well funded. - Require banks to prepare robust recovery plans. - Fully implement the new Law on Credit Institutions (LCI) and broaden the macroprudential toolkit. - Accelerate introduction of the capital conservation buffer (planned for 2030-33) and address AML/CFT weaknesses. ### Structural policies and reform agenda - Long-term challenge: - Achieving high-income status by 2045 requires significant structural reforms amid evolving global trade policies, population aging, and climate change. - Priorities to improve productivity and resilience: - Overcome structural gaps in economic governance, human development, business and labor market regulation. - Scale up high-quality investment in transportation, energy, and digital infrastructure. - Boost domestic demand via higher public investment and enhanced social safety nets and improve the business environment to reduce external imbalances and vulnerabilities. - Further diversify export markets through deeper regional integration. - Reform pillars and targets (Box 2): - Four key pillars: institutional and legal overhauls; private sector strengthening; technology and digitalization; international integration. - Institutional reform targets include reduction in headcount of 20 percent (which could amount to at least 100,000 employees over 5 years) and expected administration cost reductions of 30 percent. - Technology and digital transformation priorities include connecting national databases, advancing e-government, and prioritizing semiconductors and AI frameworks. - Institutional restructuring effective from March 1, 2025 with targets including reduction of ministries and agencies and elimination of district layer aiming for completion by August 2025 for specified items. ### Public investment scale-up: model estimates and implications - Scale-up scenario: - Scaling up public investment by 11.5 percent of GDP over 2025-30 and adopting a comprehensive reform package could raise medium-term growth by more than 2 percentage points while keeping debt dynamics under control by raising tax revenue potential. - Key actions to maximize dividends: - Develop a concrete plan and robust regulatory frameworks to attract private investors for large projects. - Improve public investment management and governance: transparent project-selection gateway, rigorous socio-economic appraisals, robust costing, and timely monitoring and ex-post evaluations. - Strengthen legal and institutional capacity to manage public debt and contingent liabilities from PPPs and SOEs. - Develop a modern PPP framework with competitive procurement and appropriate risk-sharing. - Improve debt and equity markets to meet funding needs without crowding out private investment. ### Data gaps, statistical capacity, and crypto asset considerations - Data weaknesses and needed improvements: - Large errors and omissions in the BOP, lack of IIP, weaknesses in monetary and financial statistics, fiscal data weaknesses (e.g., lack of public wage index), and long delays in some data publications. - Suggested accelerants: enhanced institutional coordination and data sharing; producing data with greater granularity and timeliness; eliminating inconsistencies; leveraging data sources across agencies; preparing improved surveys. - The IMF has been providing technical assistance including on developing the IIP. - Crypto assets: - Gross on-chain crypto asset transactions amounted to US$173 billion in 2024 (38 percent of GDP). - Stablecoin flows in 2024: inflows US$54 billion; outflows US$52 billion. - Share of Top 5 Crypto Assets in Total Transactions in 2025:Q1: Tether (usdt) 34% inflows/34% outflows; Bitcoin (btc) 26% inflows/26% outflows; USD Coin (usdc) 20% inflows/18% outflows; Ethereum (eth) 10% inflows/11% outflows; Total: 90% inflows/89% outflows. - Large E&Os and unrecorded crypto transactions: E&Os increased from less than US$10 billion before 2022 to averaging US$28 billion during 2022-24. - Recommended steps: strengthen regulation and supervision of CASPs, establish data collection mechanisms, improve inter-agency coordination, and enforce strong consumer protection and AML/CFT standards. ### Key statistics and projections (select exact figures) - Real GDP (percent change): 2021: 2.6; 2022: 8.5; 2023: 5.1; 2024: 7.1; 2025: 6.5; 2026: 5.6. - Unemployment rate: 2021: 2.5; 2022: 3.2; 2023: 2.3; 2024: 2.2; 2025: 2.3; 2026: 2.5. - CPI (period average): 2021: 1.8; 2022: 3.2; 2023: 3.3; 2024: 3.6; 2025: 3.4; 2026: 3.2. - Core inflation (period average): 2021: 0.8; 2022: 2.6; 2023: 4.2; 2024: 2.7; 2025: 3.2; 2026: 2.8. - Gross national saving (percent of GDP): 2021: 30.7; 2022: 32.7; 2023: 38.0; 2024: 37.2; 2025: 34.9; 2026: 33.2. - Gross investment (percent of GDP): 2021: 32.9; 2022: 32.3; 2023: 31.6; 2024: 30.6; 2025: 30.9; 2026: 30.8. - Public and publicly guaranteed debt (end of period, percent of GDP): 2021: 39.2; 2022: 34.9; 2023: 34.3; 2024: 31.3; 2025: 32.0; 2026: 31.8. - Current account balance (including official transfers, percent of GDP): 2021: -2.2; 2022: 0.3; 2023: 6.4; 2024: 6.6; 2025: 4.0; 2026: 2.4. - Gross international reserves (in billions of U.S. dollars): 2021: 109.4; 2022: 86.7; 2023: 92.3; 2024: 83.1; 2025: 79.3; 2026: 79.2. - GDP (in billions of U.S. dollars, current prices): 2021: 370.1; 2022: 411.1; 2023: 433.0; 2024: 459.5; 2025: 484.7; 2026: 511.1. - Balance of Payments (Current account balance, in billions of U.S. dollars): 2021: -8.1; 2022: 1.4; 2023: 27.6; 2024: 30.5; 2025: 19.6; 2026: 12.4. - Financial Soundness Indicators (2024 Q2): Regulatory Capital to Risk-Weighted Assets: 11.9; Regulatory Tier 1 Capital to Risk-Weighted Assets: 10.6; Non-performing Loans Net of Provisions to Capital: 13.9; Non-performing Loans to Total Gross Loans 1/: 5.4; Return on Assets: 1.5; Return on Equity: 19.6; Liquid Assets to Total Assets (Liquid Asset Ratio): 7.8. - Monetary Survey (selected levels, in trillions of dong): Net foreign assets 2021: 2,737; 2022: 2,361; 2023: 2,783; 2024: 2,751; 2025: 3,150; 2026: 3,440. Total liquidity (M2) 2021: 13,402; 2022: 14,227; 2023: 15,999; 2024: 17,915; 2025: 20,146; 2026: 22,460. ### Staff appraisal: priorities and final emphasis - Policy priorities: - Maintain economic resilience and promote reforms to sustain robust and stable medium-term growth. - Keep the policy mix flexible to respond to fast-evolving conditions; closely monitor incipient inflation pressures amid buoyant activity and credit growth. - If growth slows significantly due to external shock, fiscal policy should lead in supporting activity, as there is very limited room to ease monetary policy. - Allow greater exchange rate flexibility to help the economy adjust; accelerate modernization of the monetary policy framework. - Fiscal guidance: - The large, temporary fiscal stimulus in 2025 is supporting growth but will be mostly unwound by 2026. - Given downside risks, fiscal policy could provide further support if needed, starting by accelerating public investment implementation and strengthening social safety nets—while keeping some powder dry for a larger stimulus in a severe downside scenario. - Develop a robust medium-term fiscal framework, including prudent fiscal rules, to manage large spending needs while safeguarding fiscal sustainability. - Financial sector resilience: - Priority is building liquidity and capital buffers; intensify monitoring of banks through robust and regular stress testing and an early warning framework. - Upgrade insolvency framework, strengthen crisis preparedness and resolution frameworks, accelerate resolution of failed banks, and advance the macroprudential framework. - Structural reforms and external sector: - Prioritize reforms to improve productivity, upgrade infrastructure, boost domestic demand, and address AML/CFT weaknesses. - Scaling up high-quality public investment and adopting planned reforms, together with strengthening social safety nets, would help shift growth drivers toward stronger domestic demand and reduce external imbalances. - Final emphasis: - Addressing major economic data gaps remains a critical priority to support effective policies, improve risk management, and enable better decisions by firms and households; enhancing data sharing and inter-agency coordination is essential. *Source: 1vnmea2025001-source-pdf (IMF).* ### 1. An Export-Oriented Growth Model ____________________________________________________________ 5 ### 1. An Export-Oriented Growth Model ### Context and Recent Economic Developments - The economy remained resilient in 2025, building on the strong recovery in 2024, with domestic demand picking up in 2025:H1 on the back of accommodative policies and front-loading of exports (in anticipation of higher U.S. tariffs) and large one-off government spending. Growth reached 7.5 percent y/y in 2025:H1. - Headline inflation accelerated to 3.6 percent in June, but remained below the target (4½-5 percent). - The current account (CA) reached a historical surplus of 6.6 percent of GDP in 2024. - The Vietnamese dong (VND) depreciated by 5 percent against the U.S. dollar in 2024; FX reserves declined due to capital outflows partly reflecting the interest rate differential with U.S. rates. - Errors and omissions in 2024 amounted to 6.9 percent of GDP. - The VND continued its depreciation against all major trading partners’ currencies thus far in 2025. - Public consumption’s contribution to GDP growth surged in 2025:H1, partly reflecting government spending on institutional reform and several national events. ### Box 1 — Export-Oriented Growth Model: Key Findings - Exports and FDI have been key pillars in Vietnam’s growth strategy. - Over the last two decades, economic growth averaged 6½ percent as Vietnam transitioned from a low to middle-income country and poverty declined sharply. - Exports plus imports have averaged almost 170 percent of GDP in the last decade. - The U.S. and China are the largest trade partners. - The economy has benefited from large FDI inflows of over 4 percent of GDP a year. - The CA balance has been volatile with an average of 2 percent of GDP—ranging from 2-4 percent deficits in some years to 4-6 percent surpluses in others. - Since Covid-19, the average CA surplus has increased despite relatively weak export growth, largely reflecting a relatively weaker domestic demand trajectory amid several shocks including Covid-19, real estate and financial sector turbulence. - The large increase in the CA surplus in 2023 was mainly driven by a sizable contraction in imports; trade rebounded in 2024 but import levels remained relatively weak reflecting subdued domestic demand. - The recent external uncertainty and volatility underscore the benefits of gradually rebalancing the growth model, with a greater contribution from domestic demand and more diversified trade. ### Fiscal and Monetary Developments - Revenues rebounded to 17.6 percent of GDP in 2024, from a record low in 2023, but remained below the historical average. - The 30-percent increase in public wages in July 2024 was partly offset by weaker public investment (5.9 percent of GDP) reflecting persistent bottlenecks in disbursement. - The fiscal deficit is estimated at 1.5 percent of GDP with public and publically guaranteed (PPG) debt falling to 31.3 percent of GDP. - Preliminary data for 2025:H1 suggest strong revenues and higher expenditures, including from public investment, national celebrations, and costs related to the ongoing institutional reform. - The State Bank of Vietnam (SBV) has maintained policy rates near record lows since early 2023 to support the recovery. - SBV conducted FX intervention (FXI) as depreciation pressures mounted from late 2024 but has refrained from spot FXI since early 2025 and adjusted the center of the ±5-percent exchange rate (ER) band. - Bank credit growth accelerated to 15 percent in 2024 and 19 percent in June 2025 y/y; the stock of credit reached 136 percent of GDP and the credit-to-GDP gap remained positive in 2024. - Corporate bond issuances have continued to rise but remain below pre-2022 levels; maturities coming due in 2025:H2 and a limited, interconnected investor base pose risks. - The recently amended securities law aims to provide impetus to the market, though risks remain. ### Outlook and Scenarios - Higher U.S. tariffs and global trade uncertainty are expected to constrain growth through trade, investment (including FDI), financial conditions, and lower global growth; heightened uncertainty amplifies the drag (Annex V). - Direct value-added embedded in exports to the U.S. is about 10 percent of GDP. - Baseline projections assume additional U.S. tariffs on Vietnam would average 20 percent from August 2025 and tariffs on other countries announced as of July 24. - Growth is projected to decelerate to 6.5 percent in 2025 and 5.6 percent in 2026. - The CA surplus is projected to narrow to 4 percent of GDP in 2025 following a sharp drop in export growth. - Inflation is projected to remain broadly stable in 2025 below the 4½-5-percent target, and fall in 2026, reflecting the opening of the negative output gap and low inflation in China. - Downside scenario: if the higher 40 percent tariff applies to a larger share of Vietnam’s exports (e.g., goods with local content below 50 percent), economic growth could be lower by an additional 0.2-0.6 percentage point in 2025-26. - Upside scenario: trade reallocation gains could be larger if trade policy uncertainty subsides; successful implementation of planned infrastructure projects and comprehensive structural reforms could boost medium-term growth by more than 2 percentage points. ### Risks - Downside risks dominate in both the near and medium term (Annex III): higher global economic policy uncertainty, tightening global financial conditions, deterioration in external demand, weaker FDI, increased country-risk premium, FX pressures, and tighter domestic financial conditions. - Fast-rising credit growth could lead to an increase in NPLs. - Geopolitical risks could trigger spikes in commodity prices, leading to inflationary pressures and tighter financial conditions. - Natural disasters and climate change present additional risks. - On the upside, early payoffs from trade diversification efforts and confidence effects from announced reforms could raise growth. ### Monetary and Exchange Rate Policy: Discussion and Recommendations - Greater ER flexibility is critical to help the economy adjust to the trade shock. - Monetary policy should remain flexible and data dependent, closely monitoring incipient inflation pressures; core inflation remains above pre-pandemic levels as the output gap turned positive. - If a more adverse shock materializes, fiscal policy should take the lead to cushion the growth impact given available fiscal space while allowing the ER to act as a shock absorber. - Further lowering domestic rates could exacerbate capital outflows and pressures on the ER and inflation; if global interest rates decline and the output gap becomes negative with inflation in check, some monetary easing could be considered. - Temporary FXI could be warranted in cases of disruptive ER pressures but should be used sparsely given low FX reserves and high uncertainty. - A modernized monetary policy framework is important: pending SBV law reform presents an opportunity to accelerate the transition to an inflation targeting regime by strengthening SBV’s operational independence, streamlining the monetary policy toolkit, improving consistency, and incorporating forward-looking elements. - Specific operational recommendations include establishing an interest rate corridor with a floor rate by introducing a deposit facility, clear communication of policy changes and objectives, phasing out deposit and lending rate caps, and replacing credit growth ceilings (partially eliminated) with a sound macroprudential framework that promotes appropriate levels of capital and quality assets among banks. *Source: 1vnmea2025001-source-pdf (IMF).* ### 14. The authorities concurred that space for monetary easing was limited, and ### 1vnmea2025001-source-pdf - 14. The authorities concurred that space for monetary easing was limited, and ### Monetary policy - Authorities concurred that space for monetary easing was limited and monetary policy would need to remain flexible given high uncertainty. - Recent policies aimed to balance price stability, FX and financial stability, and support growth via favorable credit conditions. - SBV agreed monetary policy should be adjusted flexibly in response to the evolving environment and inflation risks should be closely monitored. - SBV has allowed greater ER flexibility but stressed the need to avoid excessive volatility that could destabilize markets and inflation expectations. - SBV reaffirmed commitment to move away from administrative measures and expanded the scope of institutions exempted from credit growth ceilings: - SBV no longer applies credit growth ceilings to wholly foreign-owned banks, foreign bank branches, joint venture banks, the Vietnam Cooperative Bank, and nonbank credit institutions. - The process should be gradual given the need to strengthen the macroprudential framework and ensure higher banks’ capital. ### Fiscal policy: stance, projections, and flexibility - Fiscal outlook and recent drivers: - Fiscal deficit projected to widen to 3.3 percent of GDP in 2025 driven by expenditure. - Fiscal impulse estimated at almost 2 percent of GDP. - Most spending increase reflects one-off factors, including costs of institutional reform (including early retirement packages) and spending related to national celebrations, and the full-year effect of the 30 percent wage increases granted in July 2024. - With these effects mostly lapsing in 2026, the fiscal deficit is projected to narrow to 2.3 percent of GDP. - Over the medium term, deficits are expected to remain around 2 percent of GDP. - Public debt is projected to gradually decline over the medium term, with an overall low risk of sovereign distress (Annex VIII). - Institutional reform fiscal impact: - The government offered early retirement packages, estimated to cost 1 percent of GDP during 2025-26, though most of it frontloaded in 2025. - The savings from a lower wage bill are estimated at 0.9 percent of GDP annually. - Role for fiscal policy if growth slows: - Given available space, fiscal policy can provide additional support if economic growth slows down markedly. - Expected higher public investment and lower tax revenues (reflecting automatic stabilizers) will provide some relief as the economy slows in 2026. - Further fiscal support could be provided if downside risks materialize with a sharper-than-expected slowdown. - Recommended targeted measures include: - Accelerated implementation of public investment and further strengthening social safety nets to help the most vulnerable and support domestic demand. - Targeted and temporary tax measures for hardest-hit sectors (e.g., provisions for accelerated depreciation and loss carrybacks), while keeping some fiscal space in reserve. - If growth declines sharply, additional temporary fiscal support could include cash transfers for vulnerable households or other targeted support for distressed but viable SMEs—while ensuring it does not induce inflation risks. - Extraordinary support measures should not impede structural adjustment and should limit fiscal costs and risks through strong governance and transparency guardrails. - Medium-term fiscal framework (MTFF) recommendations: - A robust MTFF would help identify costs and sustainable funding sources, build support for reforms, and manage risks. Key elements include: - Improving credibility of medium-term fiscal plans and linking them to the annual budget with realistic projections. - Enhancing revenue mobilization, including by expanding the tax base. - Integrating comprehensive risk assessment in the MTFF (including from SOEs and PPPs). - Upgrading fiscal transparency. - Given planned increases in borrowing for investment, revise fiscal rules and strengthen debt management: - The existing debt ceiling of 60 percent of GDP has not been a meaningful medium-term anchor with public debt kept well below it. - A lower debt ceiling—e.g., 50 percent of GDP—could be a prudent medium-term anchor, preserving buffers while allowing substantial scale-up of public investment. ### Authorities’ views on fiscal strategy - Authorities agreed fiscal policy should take the lead in supporting growth under severe downside scenarios. - Public investment implementation in 2024 reached 91 percent of the plan; authorities noted the need to accelerate disbursement in 2025 in preparation for the 2026-30 medium-term public investment plan by strengthening leadership, decentralization, and improving the legal framework. - With low levels of public debt, authorities see fiscal policy as leading role through reductions in taxes and fees and promoting public investment, balanced with measures to maintain macroeconomic stability and debt sustainability (including raising taxes, public debt, and leveraging private and foreign capital). - Institutional reform expected to improve government efficiency, boost investment, and reduce bureaucracy. ### Financial sector: recent trends, risks, and reform priorities - Recent performance and vulnerabilities: - Banks experienced solid profits in 2024. - On-balance-sheet non-performing loans (NPL) ratio declined from its peak of 5.9 percent in September 2023 to 5.3 percent in March 2025—despite remaining above the 2.3 percent level in 2022. - Banks' capital adequacy ratios improved modestly to 10.4 and 12.1 percent for public and private banks, respectively, but remain below peers. - The loan-to-deposit ratio exceeds 100 percent, increasing reliance on wholesale funding. - Liquid assets accounted for only 7.8 percent of total assets as of June 2024. - Corporate vulnerabilities remain high: private debt is elevated and a significant share of corporate debt remains at risk, especially in the real estate sector. - Channels and risks from trade shocks: - Banks could be affected through direct exposure to exporters and the broader economic slowdown. - Risks identified include: - Worsening liquidity conditions if financial conditions tighten significantly. - Increased volatility in FX could adversely impact banks with greater exposure, although on-balance-sheet FX exposures tend to be limited in general. - Tariff-induced financial stress in export-related sectors and SMEs could lead to higher NPLs and provisioning needs. - Recommended priority actions to bolster resilience: - Increase liquidity and capital buffers to manage uncertainty. - Intensify monitoring of banks, including through more robust and regular stress testing and an early warning framework. - Ensure rapid credit growth does not lead to deterioration in asset quality. - Crisis preparedness and resolution framework: - Recent progress resolving four small failed banks is welcome, but long delays and costs to SBV emphasize limits of current legal and institutional framework. - SBV’s balance sheet expanded, especially due to taking over Saigon Commercial Bank (SCB) in 2022, which could hamper its ability to manage other shocks and conduct monetary policy. - Important reforms include: - Establishing a formal financial stability function to improve inter-agency coordination with the Ministry of Finance (MoF). - Developing an emergency liquidity assistance framework and resolution financing mechanism aligned with international standards. - Ensuring the deposit insurance agency is well funded. - Requiring banks to prepare robust recovery plans. - Enhancing SBV’s resolution tools and powers. - Legal and macroprudential reforms: - Fully implementing the new Law on Credit Institutions (LCI) and broadening the macroprudential toolkit would strengthen the sector. - Recent LCI revision reintroduced provisions to facilitate banks’ seizing of NPL collateral; wider insolvency regime reforms are needed. - Ongoing Bankruptcy Law reform is an opportunity to address shortcomings in creditor rights and the insolvency system. - Roadmap to strengthen macroprudential framework should address gaps in institutional mandate, systemic risk monitoring capacity, data collection, and capital and borrower-based tools (Annex VI). - SBV could boost bank capitalization by accelerating introduction of the capital conservation buffer (planned for 2030-33). - Further efforts are urgently needed to address weaknesses in the AML/CFT regime, including aligning the legal framework with FATF standards. - Crypto assets and data: - Available data from 2024 suggests Vietnam’s crypto asset usage ranks among the highest globally, highlighting the need to enhance monitoring and regulations. - Authorities are operationalizing an initial legal framework through a five-year pilot regime permitting a limited number of crypto-asset service providers (CASPs) to offer select activities for close monitoring. - Further actions could include: - Strengthening regulation and supervision of CASPs. - Establishing robust data collection and compilation mechanisms. - Improving inter-agency coordination (MoF, State Securities Commission, SBV). - Enforcing strong consumer protection and AML/CFT standards. ### Authorities’ views on financial sector reforms - Authorities concurred with staff’s assessment while highlighting significant efforts made to improve resilience. - SBV noted recent reforms and that the new LCI (including recent amendments) will improve banks’ capacity to tackle NPLs and manage risks and help build capital buffers, including through the capital conservation buffer, while allowing enhanced monitoring of banks. - Authorities agreed on the need to closely monitor trade shock impacts on banks, strengthen systemic risk assessment, develop the macroprudential toolkit, accelerate AML/CFT strengthening, and advance crypto regulatory framework with IMF support. ### Structural policies and reform agenda - Long-term challenge and reform imperatives: - Achieving Vietnam’s development agenda and the aim to reach high-income status by 2045 will require significant structural reforms amid evolving global trade policies, population aging, and climate change. - Authorities announced a broad reform agenda toward reinvigorating the growth model. - Priorities to improve productivity and resilience (see Selected Issues): - Overcome structural gaps relative to more developed economies, including in economic governance, human development, business and labor market regulation—addressing inefficiencies in labor, capital, and product markets. - Scale up high-quality investment in transportation, energy, and digital infrastructure. - Boost domestic demand via higher public investment and enhanced social safety nets and improve the business environment to reduce external imbalances and vulnerabilities. - Further diversify export markets through deeper regional integration. - Box 2 — summary of planned reform pillars and targets: - Four key pillars: institutional and legal overhauls, private sector strengthening, technology and digitalization, and international integration. - Institutional reforms: - Institutional restructuring plan to streamline organizational apparatus and improve government efficiency. - Targets include reduction in headcount of 20 percent, which could amount to at least 100,000 employees over 5 years (additional cuts expected across districts and communes). - Government expects restructuring to reduce administration costs by 30 percent. - Private sector: elevate role as main engine of growth and reduce administrative burdens. - Technology and digital transformation: - Targets for connecting national databases, advancing e-government, increasing productivity. - Semiconductors identified as a strategic priority; legal and institutional frameworks for AI and digital assets under development. - International integration: deepen economic and trade integration and integration in science, technology, and security. - Healthcare and education: reduce healthcare costs and modernize vocational and tertiary education with digital technologies. - Large infrastructure projects planned (e.g., railways, nuclear plants) over the next decade with efforts to decentralize decision making and improve public investment management. - Institutional restructuring timeline and scope notes: - Effective from March 1, 2025. - Targets include reduction of ministries and agencies, elimination of district layer (move to two-tier system), and merging communes (examples: Reduce 50% Provinces; Eliminate Districts; Merge Communes). - Restructuring expected to be completed by August 2025 for tiles in dashed lines. *Source: Content unit 1vnmea2025001-source-pdf.* ### 26. A sound macro-fiscal strategy is crucial for maximizing the benefits of large public ### A sound macro-fiscal strategy is crucial for maximizing the benefits of large public ### Overview - Large scaling-up of high-quality public investment can improve infrastructure and boost medium-term growth, but poses challenges for macroeconomic management (including price and financial stability), implementation capacity, and public debt dynamics. - Growth effects are magnified if investment is accompanied by improved public investment efficiency and reforms to address structural gaps and raise productivity. - A balanced and sustainable financing strategy is key to avoid disruptive public debt dynamics (¶17). ### Public investment scale-up: model estimates and implications - Model estimates illustrate that scaling up public investment, by 11.5 percent of GDP over 2025-30, and adopting a comprehensive reform package to address structural gaps could raise medium-term growth by more than 2 percentage points, while keeping debt dynamics under control by raising tax revenue potential. - To maximize growth dividends, key actions include: - Develop a concrete plan and establish robust, stable regulatory frameworks to foster a more predictable investment environment and help attract private investors for the large projects (e.g., transportation, energy). - Improve public investment management and governance to ensure higher spending translates into productive capital, including in climate-resilient infrastructure and renewable energy. This includes a transparent and criteria-based project-selection gateway, rigorous socio-economic appraisals, robust costing and cost-benefit analysis, and timely monitoring and ex-post evaluations. - Strengthen the legal and institutional capacity to manage public debt and contingent liabilities from PPPs and SOEs, and enhancing their governance and oversight—given the envisaged role in the large projects. - Press ahead with plans to develop a modern PPP framework, underpinned by competitive procurement and appropriate risk-sharing. - Continue efforts to improve the functioning of debt and equity markets to meet large funding needs, without putting excessive pressure on the banking system or crowding out private investment. ### Productivity constraints and structural gaps - Total factor productivity (TFP) has been on a downward trend since 2015 and is lagging regional peers. - Dualism between FDI and domestic sectors: - FDI sector accounted for almost 40 percent of firms’ employment in 2022 and over 70 percent of exports in 2024. - Policies to address dualism and improve productivity include: - Promote a level-playing field for domestic and FDI firms (e.g., logistics, land use, red tape, taxes). - Improve access to credit for domestic firms. - Incentivize FDI firms to enhance spillovers to domestic firms, fostering private sector dynamism and attracting talent to domestic firms, especially SMEs. ### Labor market and skills - Skill mismatches impede labor productivity convergence with regional peers. - Identified inefficiencies: skill mismatches, high labor market churning, lack of vocational skills, and high informality. - Wage gaps between tradable and non-tradable sectors and overqualified workers in vocational roles hinder efficient talent allocation. - Recommended measures: - Active labor market policies to address skill and qualification mismatches and gaps in vocational skills, e.g., broadening public-private partnerships with state co-financing for education and training. - Develop a nationwide platform of job vacancies to help identify mismatches. ### Credit, resource misallocations, and financial market reforms - Vietnam’s private firms’ borrowing cost premium (relative to the government’s borrowing costs) is significantly higher than peers, reflecting distortions in the domestic sovereign debt market (2024 Selected Issues). - Credit and resource misallocations are sizeable; example: real estate and construction sectors have had significantly higher debt relative to their revenue than other sectors despite more sluggish productivity growth. - Gradually moving to a more efficient allocation could lead to potentially large TFP gains of more than 50 percent. - Reforms to reduce borrowing costs and improve capital allocation include: - Remove distortionary credit policies, further reduce cross-ownership between banks and corporates, and introduce macroprudential policies to limit excessive sector concentration. - Continue developing domestic capital markets, including by strengthening transparency, governance, and modernizing the bankruptcy framework. - Reform the sovereign bond market, making rates more market based. ### AI adoption and human capital - Enhancing preparedness for AI adoption would help harness benefits and sustain high long-term growth while mitigating adverse impacts. - Priorities: accelerate digital infrastructure, boost productivity, and accumulate human capital to advance AI adoption and amplify long-term growth dividends. - Risks: AI adoption may displace certain occupations where informal and female workers are relatively more exposed, calling for labor market policies (up-skilling and re-skilling) and strengthening safety nets. ### Data gaps and statistical capacity - Rapid economic transformation is outpacing development of robust economic statistics needed for policymaking and risk management. - Noted weaknesses: large errors and omissions in the BOP, lack of international investment positions (IIP), and weaknesses in monetary and financial statistics; fiscal data weaknesses (e.g., lack of public wage index); long delays in some data publications (e.g., fiscal and FSIs). - Improvements will take time and require overcoming legal constraints, institutional resistance, and investing in capacity. - Suggested accelerants to progress: 1. Enhanced institutional coordination and data sharing practices. 2. Producing data with greater granularity, broader coverage, and timeliness. 3. Eliminating data inconsistencies. 4. Leveraging data sources across agencies (e.g., monetary statistics, tax data). 5. Preparing surveys and improvements to data collection systems serving stakeholders’ needs. - The IMF has been providing technical assistance including on developing the IIP. ### Authorities’ views and planned actions - Authorities committed to broad reforms and improving public infrastructure to boost medium-term growth; they view PPPs as a key tool for large funding needs and agree on ensuring public investment quality and improving PPP mechanisms and policies. - Authorities noted ongoing efforts to further develop capital (debt and equity) markets to improve the investment climate and mobilize private capital, and efforts to diversify trade and develop the domestic economy. - Statistical reforms: authorities appreciated Fund support, noted the rebasing of the national accounts is scheduled for completion in 2026, and plan to update the Budget Law to better support GFS collection/compilation and revise Decree 16 on BOP management. They acknowledged the importance of enhancing data transparency to attract external and private funding for infrastructure. ### Staff appraisal and policy guidance - Vietnam faces challenges from a changing and uncertain global trade landscape; export-oriented growth delivered substantial gains but rising volatility and high uncertainty pose new risks. - Policy priorities: - Maintain economic resilience and promote reforms to sustain robust and stable medium-term growth. - Keep the policy mix flexible to respond to fast-evolving conditions; closely monitor incipient inflation pressures amid buoyant activity and credit growth. - If growth slows significantly due to external shock, fiscal policy should lead in supporting activity, as there is very limited room to ease monetary policy—given already low policy rates and risk of increasing FX and inflationary pressures. - Allow greater exchange rate flexibility to help the economy adjust; accelerate modernization of the monetary policy framework. - Fiscal policy: - The large, temporary fiscal stimulus in 2025 is supporting growth but will be mostly unwound by 2026. - Given downside risks, fiscal policy could provide further support if needed, starting by accelerating public investment implementation and strengthening social safety nets—while keeping some powder dry for a larger stimulus in a severe downside scenario. - Develop a robust medium-term fiscal framework, including prudent fiscal rules, to manage large spending needs while safeguarding fiscal sustainability. - Financial sector resilience: - Banks face vulnerabilities from low capital levels and high NPLs amidst rapid credit growth; priority is building liquidity and capital buffers. - Intensify monitoring of banks through more robust and regular stress testing and an early warning framework. - Recent legal changes to facilitate NPL resolution are welcome; also important to upgrade the insolvency framework, strengthen crisis preparedness and resolution frameworks, accelerate resolution of failed banks, and advance the macroprudential framework. - Structural reforms: - Prioritize actions to improve productivity, upgrade key infrastructure, and boost domestic demand. - Overcome structural gaps: improve business environment and economic governance, step up efforts to address AML/CFT weaknesses, and pursue broader reforms in debt, capital, and labor markets to raise productivity and mobilize resources for infrastructure projects. - External sector: - The external sector position in 2024 is assessed to be substantially stronger than warranted by fundamentals and desirable policies, though assessment is constrained by data gaps and high current account volatility. - Scaling up high-quality public investment and adopting planned reforms, together with strengthening social safety nets, would help shift growth drivers toward stronger domestic demand and reduce external imbalances. - FX reserves were assessed to be moderately below adequacy at end-2024 as SBV intervened to contain disruptive FX volatility. - Final emphasis: addressing major economic data gaps remains a critical priority to support effective policies, improve risk management, and enable better decisions by firms and households; enhancing data sharing and inter-agency coordination is essential. *Source: IMF staff report excerpt on Vietnam (paragraphs 26–42).* ### 43. It is recommended that the next Article IV consultation be held on the standard 12- ### 1vnmea2025001-source-pdf - 43. It is recommended that the next Article IV consultation be held on the standard 12- ### Recent Economic Developments - Growth returned to pre-pandemic levels in 2024 as domestic demand strengthened after a series of financial and external shocks in 2023. - Contributions to GDP by activity (quarterly, y/y) show Agriculture, Forestry and Fishing; Industry and Construction; Services; Others and Total GDP across 2019Q1–2025Q2 (chart present). - Contributions to growth by expenditure (quarterly, y/y) show Private Consumption, Public Consumption, Investment, Net Exports, Others and Total GDP across 2019Q1–2025Q2 (chart present). - Real Retail Sales Growth (3-month moving average, y/y) with category contributions: Trade, Hotel & Restaurants and Tourism, Others, Total; peak values noted around Jan-19 to Apr-25 (chart present). - Purchasing Manufacturing Index in Vietnam (0-100 index) shows Overall and Employment from Mar-21 to Jun-25 with a 50 no-change line; values ranged between 35 and 55 in shown period. - Index of Industrial Production (3-month moving average, y/y) shows Headline, Wearing Apparel, Electronics from Feb-20 to Jun-25; electronics and garment led industrial production recently. - International Visitors to Vietnam (In million people, % of Pre-Pandemic) plotted Jan-19 to Apr-25 with series for Asia excl. China, China, Others and totals (chart present). ### Prices and Wages - Headline inflation contained owing to disinflation in fuel prices and contained administered prices; core inflation has picked up driven by increasing cost of housing. - Core inflation averaged higher since 2022 relative to pre-pandemic settings, despite disinflationary spillovers from China. - Input Producer Price Inflation (In percent, y/y) shown by Agriculture, Industry, Services (chart present). - Average wages and employment: Number of Employed Persons and real wages (RHS, millions VND) across 2019Q1–2025Q1 (chart present). Notes: Real wages are nominal wages deflated by the CPI, in constant 2019 prices. - Headline CPI contributions (Jan-22 to May-25) show Core, Raw Food, Fuel, House Utilities, Education fees, Others and Headline CPI (chart present). - Core CPI contributions (Jan-21 to May-25) shown for Processed food; meals out; beverages, Housing, Household durable goods, Other goods, Other services. ### External Sector - Trade rebounded in recent months, likely reflecting export frontloading. - Despite a slowdown in exports in 2024H2, electronics exports picked up in 2025; imports showed a similar pattern given large share of imported intermediate inputs. - FDI commitments and disbursements remained resilient, with commitments mainly driven by manufacturing. - Continued strong FDI inflows in 2024 were offset by other capital outflows and debt repayment as the exchange rate continued to depreciate. - Contributions to goods export growth by commodities (y/y, percent): Textile, Electronics and Telephone, Furniture, Raw Materials, Machinery and Autos, Other, Total (chart present). - Contributions to goods import growth by commodities (y/y, percent) displayed similarly. - Financial Account (In percent of GDP) components 2020–2024 include Net FDI, Net portfolio investment, Net medium and long term debt, Short-term capital flows, Net financial account (chart present). - Exchange Rates (VND / US$) interbank and official Jan-22 to Jul-25 shown; note: shaded area indicates the State Bank of Vietnam's exchange rate trading band. - Trade Performance (3mma, y/y, percent) shows Exports, Imports and Trade Balance (in bil USD, RHS) Jan-16 to Jan-25 (chart present). - FDI Commitments and Disbursements (In billions of US dollars) and sectoral composition shown (chart present). ### Monetary Sector - Policy rates remain below pre-pandemic levels and close to historical lows, with greater volatility in interbank rates recently. - Changes in regional policy interest rates (In percentage points from end of 2019) include VN, MPH, LIDN, THA, MYS, US (chart present). - Deposit rates have risen since early 2024 amid bank liquidity pressures while lending rates continued to fall; lending rate series discontinued after September 2024. - Lending and Deposit Rates (Monthly values, in percent) plotted Feb-20 to Jun-25. - Credit and Deposit Growth (In percent, y/y) show deposit growth and credit growth; both boosted in 2025 while squeezing banks’ profit margins. - Stock Market Indices: VNINDEX (LHS) and Gold Premium (RHS) Jan-20 to Jul-25; stock prices remained stable in 2024, declined in 2025 after April 2 US tariffs announcement, then recovered. ### Fiscal Sector - Fiscal deficit remained broadly unchanged in 2024 while public debt continued to decline. - Public debt dynamics aided by positive growth-interest rate differentials and one of the lowest government bond yields among ASEAN EMs despite recent increases in 2025. - VAT and PIT revenues recovered in 2024, partly offset by weaker other tax revenues; 2025:H1 outturns suggest strong broad-based recovery in tax revenues. - Non-tax revenue rebounded strongly in 2024 and continued in 2025:H1, mainly driven by fees from land use rights along with recovery in the real estate market. - Public investment disbursement: after acceleration in 2023, disbursement slowed in 2024 but started to accelerate in 2025:Q2. ### Financial Sector Developments - Bank profitability of JSCBs remained stable in 2024, while SOCB profitability decreased. - Capital adequacy remained weak, especially in SOCBs. - Liquidity remains tight as lending continues to grow faster than deposits; NPLs have started to stabilize. - Impaired assets of banking system (2019–2024) include Reported NPLs, NPLs at VAMC, Restructured loans*, with Restructured loans* including legacy restructured loans and covid 19 loan forbearance. - Corporate bond issuances continued to recover with majority issued by banks; real estate sector forms bulk of upcoming maturities. - Scheduled maturities in corporate bond market (2025Q3–2026Q4) in billions of US dollars shown by Real estate, Banking, Others. ### Key Statistics and Projections (select exact figures from Tables) - Real GDP (percent change): 2021: 2.6; 2022: 8.5; 2023: 5.1; 2024: 7.1; 2025: 6.5; 2026: 5.6 (Table 1). - Unemployment rate: 2021: 2.5; 2022: 3.2; 2023: 2.3; 2024: 2.2; 2025: 2.3; 2026: 2.5 (Table 1). - CPI (period average): 2021: 1.8; 2022: 3.2; 2023: 3.3; 2024: 3.6; 2025: 3.4; 2026: 3.2 (Table 1). - Core inflation (period average): 2021: 0.8; 2022: 2.6; 2023: 4.2; 2024: 2.7; 2025: 3.2; 2026: 2.8 (Table 1). - Gross national saving (in percent of GDP): 2021: 30.7; 2022: 32.7; 2023: 38.0; 2024: 37.2; 2025: 34.9; 2026: 33.2 (Table 1). - Gross investment (in percent of GDP): 2021: 32.9; 2022: 32.3; 2023: 31.6; 2024: 30.6; 2025: 30.9; 2026: 30.8 (Table 1). - Public and publicly guaranteed debt (end of period, percent of GDP): 2021: 39.2; 2022: 34.9; 2023: 34.3; 2024: 31.3; 2025: 32.0; 2026: 31.8 (Table 1). - Current account balance (including official transfers, percent of GDP): 2021: -2.2; 2022: 0.3; 2023: 6.4; 2024: 6.6; 2025: 4.0; 2026: 2.4 (Table 1). - Gross international reserves (in billions of U.S. dollars): 2021: 109.4; 2022: 86.7; 2023: 92.3; 2024: 83.1; 2025: 79.3; 2026: 79.2 (Table 1). - GDP (in billions of U.S. dollars, current prices): 2021: 370.1; 2022: 411.1; 2023: 433.0; 2024: 459.5; 2025: 484.7; 2026: 511.1 (Table 2). - Balance of Payments (selected, in billions of U.S. dollars): Current account balance 2021: -8.1; 2022: 1.4; 2023: 27.6; 2024: 30.5; 2025: 19.6; 2026: 12.4. Trade balance 2021: 15.7; 2022: 29.4; 2023: 44.0; 2024: 43.2; 2025: 39.0; 2026: 33.6 (Table 3). - Financial Soundness Indicators (2024 Q2): Regulatory Capital to Risk-Weighted Assets: 11.9; Regulatory Tier 1 Capital to Risk-Weighted Assets: 10.6; Non-performing Loans Net of Provisions to Capital: 13.9; Non-performing Loans to Total Gross Loans 1/: 5.4; Return on Assets: 1.5; Return on Equity: 19.6; Liquid Assets to Total Assets (Liquid Asset Ratio): 7.8 (Table 6). - Monetary Survey (selected levels, in trillions of dong, 2021–2026 projections): Net foreign assets 2021: 2,737; 2022: 2,361; 2023: 2,783; 2024: 2,751; 2025: 3,150; 2026: 3,440. Total liquidity (M2) 2021: 13,402; 2022: 14,227; 2023: 15,999; 2024: 17,915; 2025: 20,146; 2026: 22,460 (Table 5). - Corporate bond market scheduled maturities (2025Q3–2026Q4) show series by Real estate, Banking, Others with amounts 2025Q3–2026Q4 in billions of US dollars (chart present). ### Policy-relevant Observations (drawn from presented analysis) - Domestic demand recovery drove growth restoration to pre-pandemic levels in 2024. - Core inflation pressure is concentrated in housing costs even as headline inflation benefits from fuel disinflation. - Electronics exports and industrial production led a partial external sector rebound in 2025 after 2024H2 export slowdown. - Bank liquidity pressures pushed deposit rates up since early 2024, while lending rates fell, supporting credit and deposit growth in 2025 but compressing bank margins. - Public debt declined through 2024 aided by growth-interest rate differentials and low government bond yields among ASEAN EMs, though yields increased in 2025. - Non-tax revenues and land-use-fee-driven receipts supported fiscal outturns in 2024 and 2025:H1; public investment disbursement recovered in 2025:Q2 after slowing in 2024. *Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1vnmea2025001-source-pdf.pdf* ### Annex I. Progress with IMF Recommendations ### Annex I. Progress with IMF Recommendations ### Fiscal Policy - Staff advice in 2024: - Vietnam needs a medium-term remuneration and hiring strategy with gradual wage increases, while attracting a qualified and professional workforce. - Over the medium term, Vietnam will have to tackle various challenges, including optimizing the composition of spending to promote better and more efficient public services. - Continue efforts to improve social safety nets by increasing their adequacy and coverage and ensuring well-targeted, timely, and cost-effective support measures, while also building institutional capacity to respond to large shocks. - Strengthen the long-term sustainability of the pension system. - Adopt revenue-enhancing reforms and press ahead with the Tax System Reform Strategy, including reducing exemptions and rationalizing preferential regimes, broadening the VAT base, raising environmental tax and excise duties. - Actions since the 2024 Article IV Consultation: - The government is looking to attract and retain high-quality civil servants by introducing performance-based compensation. - The authorities have formulated the Medium-Term Public Investment Plan for 2026-30 to foster high and sustainable economic growth, enhance infrastructure, and support equitable development. Priorities are given to strategic infrastructure and development projects that have large socio-economic impacts. - The new Law on Social Insurance issued in 2024 allowed VSS to diversify its investment, including purchasing government bonds in international markets. - The new VAT Law introduced reforms aiming to broaden the tax base and enhance compliance. ### Monetary Policy - Staff advice in 2024: - Monetary policy needs to navigate supporting the recovery, while remaining vigilant against inflation risks. - Accelerate steps to modernize the monetary policy framework, including allowing greater exchange rate flexibility while safeguarding FX reserve buffers to help manage large shocks. - Other key steps include greater operational autonomy to SBV and replacing credit growth ceilings and forbearance measures with a sound macroprudential framework. - Actions since the 2024 Article IV Consultation: - Interbank liquidity was tightened in 2024 in support of the exchange rate. Inflation has remained well below target. - The FPAS forecasting model is being used by the SBV to inform monetary policy decision. - The FPAS TA program concluded in 2024:Q3. - The SBV has phased out credit growth ceiling for some institutions (including foreign bank branches). - TA to improve FX reserve management is planned for September 2025. ### Financial Sector Policies - Staff advice in 2024: - Continuing to build the resilience of the financial sector remains a priority, including bolstering banks and corporates’ balance sheets, improving bank asset quality and capital ratios, while phasing out loan forbearance. - The implementation of 2024 Law on Credit Institutions (LCI) is critical. - Strengthen the ability to resolve failed banks and reform the insolvency framework to improve the functioning of the financial system and capital markets. - Further reforms to the bank resolution framework to facilitate the timely restructuring of failed banks. - Vietnam has been in the FATF grey list since 2023. Efforts to implement the action plan need to be prioritized, starting with aligning the legal framework with the FATF standards. - Actions since the 2024 Article IV Consultation: - Loan classification and provisioning rules were normalized in December 2024 for loans restructured since April 2023. - New loan forbearance for those affected by Typhoon Yagi were introduced in late 2024 and scheduled to terminate by end-2025. - Implementation guidance for the LCI was introduced in mid-2024. A new asset classification was introduced to ensure consistency with the LCI. SBV amended the LCI to give more power to banks to foreclose collateral. - The compulsory transfers of 4 banks under special control to an SOCB and private banks took place in Q4 2024 and early 2025. - There has been progress in addressing some measures in the FATF action plan, but further efforts are needed. ### Structural Policies - Staff advice in 2024: - Sustaining high medium-term growth requires further progress on structural reforms to raise productivity growth. - Simple and clearer rules and regulations to help reduce legal uncertainty and allow a swifter decision-making process by public officials. - Improving functioning and governance of capital markets. - Further climate change effort is required to implement Vietnam’s green agenda. - Actions since the 2024 Article IV Consultation: - The ongoing institutional restructuring is expected to streamline decision-making and improve efficiency. The ongoing reforms to promote the private sector aim to improve the business environment and productivity. - The authorities have improved the consistency of laws and regulations. Recent legal changes allow laws to just set frameworks and can be amended frequently and faster. - The securities law and other related securities rules were amended in late 2024 to strengthen investor protection and public disclosure. - Vietnam is also working on crypto asset regulation with IMF TA support and has passed the new Law on Digital Technology Industry to recognize digital assets. - The updated National Adaptation Plan 2021-23 with Vision to 2050 issued in November 2024 aims to enhance resilience and adaptation and integrated climate change response measures into national strategies and planning. - Vietnam is developing an ETS, with a pilot planned for 2025 and full implementation by 2029. - The new Power Development Plan envisions a doubling of power production with renewables accounting for about a third of the total capacity by 2030. *Source: Annex I. Progress with IMF Recommendations (content unit).* ### Annex II. Integration of Capacity Development Assistance in Surveillance ### Overview and integration - The IMF has maintained an active capacity development (CD) relationship with the authorities. - CD has been well integrated with IMF surveillance. High-quality CD is crucial for helping implement IMF policy recommendations and collaboration with the authorities. - Key surveillance priorities focus on updating policy frameworks, boosting financial stability, and enhancing data quality and transparency to support Vietnam in progressing to the next stage of its development. ### CD areas and activities - Fiscal: - Multi-year CDs on (i) tax administration, with a Tax Administration Diagnostic Assessment Tool assessment planned for 2025; (ii) improving fiscal risk management and reporting; (iii) enhancing the sustainability, equity, and efficiency of the pension system; and (iv) upgrading Treasury’s Financial Management Information System, cash management, and internal audit. - Other fiscal CDs include enhancing revenue mobilization (e.g., taxation of natural resources and real estate, and implementation of “Pillar 2”). - The Fund has also supported Vietnam Customs to develop an action plan for compliance improvement and enforcement enhancement. - Macro and monetary: - A multi-year TA program has been provided to MOF and SBV to help upgrade the authorities’ macroeconomic framework. - The Fund has provided CD on modernizing the monetary policy framework to SBV through a multi-year Forecasting and Policy Analysis System (FPAS) TA program since 2019, which was concluded in 2024:Q3. - TA to improve FX reserve management is planned for September 2025. - Financial sector: - FSSR follow-up TAs have been focusing on stress testing, crypto asset regulation and supervision, and digital bank regulation. - TA on developing a regulatory and supervisory framework for crypto assets has been provided to SSC and SBV. - TAs on stress testing and consolidated supervision are being planned. - A multi-year TA has also been provided to address deficiencies in the AML/CFT. - The multi-year TA to help the SBV internal audit function has been temporarily paused amid the institutional restructuring. - Statistics: - CDs on improving national accounts statistics (including GDP rebasing), external sector, government finance, prices, and monetary and financial statistics, including strengthening capacity in compiling and disseminating public debt statistics. *Source: Annex II. Integration of Capacity Development Assistance in Surveillance (content unit).* ### Annex III. Risk Assessment Matrix ### External Risks (likelihood, time horizon, impact, policy response) - Trade policy and investment shocks - Likelihood: High - Time horizon: ST, MT - Impact if realized: High — Lower demand, higher precautionary savings, tighter financial conditions, capital outflows and exchange rate pressures. - Policy response: - Provide targeted policy support using fiscal space. - Allow greater exchange rate flexibility. - Accelerate structural reforms and improve business environment. - Continue to diversify trade and FDI. - Enhance social safety nets. - Tighter financial conditions and systemic instability - Likelihood: Medium - Time horizon: ST - Impact if realized: High — Lower global demand, tighter financial conditions, capital outflows and exchange rate pressures limit policy space. - Policy response: - Provide targeted policy support using fiscal space if global conditions impact some groups disproportionately. - Allow greater exchange rate flexibility. - Regional conflicts - Likelihood: Medium - Time horizon: ST, MT - Impact if realized: Medium — Higher and volatile commodity prices, tighter financial conditions, lower global demand, supply chain disruptions. - Policy response: - Provide targeted policy support to vulnerable households. - Allow greater exchange rate flexibility. - Accelerate structural reforms and improve business environment. - Diversify sourcing of intermediate goods. - Commodity price volatility - Likelihood: Medium - Time horizon: ST, MT - Impact if realized: High — Lower exports and domestic demand, tighter financial conditions. - Policy response: - Allow greater exchange rate flexibility. - If growth declines appreciably, consider countercyclical easing. - Accelerate structural reforms and improve business environment. - Deepening geoeconomic fragmentation - Likelihood: High - Time horizon: ST, MT - Impact if realized: High — Supply disruptions and weaker confidence adversely affect economic activity globally. While Vietnam may benefit from trade diversion, the country is vulnerable due to its trade and FDI based growth model. - Policy response: - Allow greater exchange rate flexibility. - Accelerate structural reforms and improve business environment. - Continue to diversify trade and FDI. - Enhance social safety nets. ### Domestic Risks (likelihood, time horizon, impact, policy response) - Distress among real estate developers, in weak banks, and the corporate bond market - Likelihood: High - Time horizon: ST, MT - Impact if realized: High — Reduced economic activity accompanied by tighter financial conditions as credit risks increase. - Policy response: - Establish a crisis monitoring function to address short-term risks to financial stability. - Urgently modernize the bank resolution and the emergency liquidity frameworks, and resolve failed banks. - Prevent contagion from troubled real estate developers to avoid posing risks to financial stability. - Over time, strengthen bank regulation, supervision and resolution frameworks, establish a well-functioning corporate bond market and firm insolvency framework. - Debt overhang and liquidity constraints - Likelihood: Medium - Time horizon: ST, MT - Impact if realized: Medium — Slower growth and increased financial stability risks. - Policy response: - Target support to viable firms, ease conditions for smooth exit for other firms and support vulnerable households. - Closely monitor asset quality, enhance provisioning, and rebuild capital buffers. - Climate change - Likelihood: High - Time horizon: ST, MT - Impact if realized: High — By 2100, climate change could severely impact more than 12 percent of the population and reduce growth by 10 percent. - Policy response: - Address both climate mitigation and adaptation. - Lower the intensity of fossil fuels. - Provide stronger incentives through taxation of fossil fuels. - Invest in climate resilient infrastructure. - Improve capacity to adapt technological change. - Note: “L” =Low; “M” =Medium; “H” =High. The RAM shows events that could materially alter the baseline. The relative likelihood definitions: “low” = probability below 10 percent, “medium” = between 10 and 30 percent, and “high” = between 30 and 50 percent. *Source: Annex III. Risk Assessment Matrix (content unit).* ### Annex IV. External Sector Assessment ### Key assessment and 2024 outcomes - Vietnam’s external position in 2024 is assessed to be substantially stronger than the level implied by medium-term fundamentals and desirable policies. - The current account (CA) registered a surplus of 6.6 percent of GDP in 2024, similar to the 2023 level. - The CA has exhibited high volatility especially since the Covid-19 pandemic and is expected to narrow over the medium term. - Policies to durably raise the contribution of domestic demand, especially high-quality public and private investment, and reducing precautionary savings, along with structural reforms, would help with the external adjustment and bring the CA back to its norm. ### 2024 details - Goods and services: - Merchandise export and import growth rebounded in 2024 led by electronics. - The goods trade surplus narrowed in 2024 as imports, notably those for re-exports, rebounded faster. - Services payments increased rapidly driven by transportation and travel services, leading to a widened services deficit. - The lower trade surplus of goods and services was more than offset by a decline in the investment income deficit by US$6.8 billion, mainly due to lower FDI dividend payouts. - Financial account: - The financial account deficit widened in 2024, driven by increased portfolio outflows and medium- and long-term debt repayment. - Portfolio investment outflows increased sizably, especially in 2024:Q2 and Q4. - Net direct investment (DI) inflows continued to be robust due to stronger FDI inflows (of 4.4 percent of GDP) while residents’ DI abroad increased after some liquidation in 2023. - Unrecorded capital outflows were likely substantial, reflected in large errors and omissions of 6.9 percent of GDP. - FX reserves and adequacy: - FX reserves decreased by US$9.2 billion in 2024. - Gross international reserves (GIR) declined to US$83.1 billion by end-2024 following SBV’s intervention in the spot market. - This level is equivalent to 2.3 times the level of short-term external debt or 2.5 months of prospective imports. - The level corresponds to 58 percent of the Assessing Reserve Adequacy (ARA) metric under a fixed exchange rate regime or 99 percent under a floating exchange rate regime. - Staff assesses the end-2024 reserve level to be moderately below adequacy, as the exchange rate regime moved from stabilized to crawl-like in mid-2023. - Errors and omissions increased from US$19 billion in 2023 to US$32 billion in 2024. ### Model-based assessment and exchange rate - CA model results: - The CA gap is estimated at 8.2 percent of GDP. - The gap mainly reflects the large unexplained factors (8.4 percent of GDP), while policy gaps contributed -0.2 percent of GDP. - Specific contributions: - Credit gap from relatively fast credit expansion and FXI/capital control gap contributed -1.6 percent of GDP. - Fiscal policy gap contributed 1.4 percent of GDP from less expansionary fiscal policy (compared to the rest of the world). - The large unexplained factors partly reflect data gaps in the BOP, i.e., the large errors and omissions (6.9 percent of GDP in 2024) and structural factors not accounted for by the model (such as high labor informality and weak social safety nets that lead to precautionary saving). - REER assessments: - The CA model implies a REER gap with an undervaluation of -12.9 percent. - The EBA REER models indicate an overvaluation of 14.6-22.2 percent. - Staff notes significant uncertainty surrounding the exchange rate assessment. - The real effective exchange rate (REER) appreciated by 1.3 percent in 2024, mainly due to inflation differentials with respect to key trading partners. - The nominal effective exchange rate (NEER) appreciated by 0.5 percent in 2024. *Source: Annex IV. External Sector Assessment (content unit).* ### 2024. The NEER appreciation in 2024 despite the depreciation of the VND against the US dollar was ### 1vnmea2025001-source-pdf - 2024. The NEER appreciation in 2024 despite the depreciation of the VND against the US dollar was ### Exchange rate developments and competitiveness - The NEER appreciation in 2024 despite the depreciation of the VND against the US dollar was largely due to the broad-based appreciation of the US dollar against other currencies. - From a sequential perspective, both the REER and NEER fluctuated throughout 2024, with: - REER ending 0.2-percent stronger relative to the 2023:Q4 level. - NEER depreciating by 0.1 percent at year-end. - Charted context: Real Effective Exchange Rate, 2006-2024 (2010=100), sources: INS; and IMF staff calculations. ### External imbalances, savings, and investment - Continued large external imbalances mainly reflect: - Still high savings amid continued declines in investment. - Structural factors: export-oriented growth strategy contributed to a rise in national savings. - Weak social safety nets and weakened confidence from a series of large shocks during 2020-23 (Covid, real estate, and financial sector shocks) likely contributed to high precautionary savings. - Investment trends: - Investment, in particular non-FDI related investment, has been on a declining trend since 2022 amid large domestic and external shocks. - Policy measures to reduce the CA gap: - Boost domestic demand, especially public and private investment. - Accelerate planned infrastructure projects and remove red tape and bottlenecks for investment. - Strengthen social safety nets. *Sources: WEO; INS; and IMF staff calculations.* ### Annex V — Tariffs in the Baseline: assumptions and transmission - Baseline tariff assumptions: - Announced U.S. tariffs assumed to take effect from August 2025 permanently. - For Vietnam: - 20-percent additional tariff applies to all goods, except sectoral tariffs already effective as of July 25. - 40-percent additional tariff on “transshipment” goods applies to exports with very low domestic content and hence has minimal impact on Vietnam’s GDP growth (if the rules of origin are more stringent, the impact could be large). - For other countries, baseline assumes tariffs announced as of July 24 apply. - Considerable uncertainty remains regarding implementation of the 40-percent tariff on “transshipment” and the sector-specific tariffs. - Based on assumptions, the effective U.S. tariff on all goods from Vietnam is estimated to increase to over 25 percent from below 4 percent. - Transmission channels and impacts: - Trade channels: - Direct effect expected to dominate in the baseline, assuming limited reallocation due to greater scrutiny on goods’ origins and continued global trade policy uncertainty. - Direct effect rationale: - Exports to the US account for about 30 percent of Vietnam’s total exports. - About 10 percent of Vietnam’s total value added is embedded in such exports to the US—a share rising since 2017 and significantly higher than the ASEAN average. - Indirect effect: - Higher U.S. tariffs could reduce Vietnam’s exports of intermediate goods to other countries as inputs for their exports to the US. - Trade reallocation could occur, potentially prompting a shift in US import demand towards Vietnam, as observed following China-US trade tensions around 2018. - Financial channels: - Higher tariffs and resulting lower exports could reduce FDI and other financial inflows and increase exchange rate pressures. - Weaker profitability and lower liquidity in the large exporting FDI sector could have negative spillovers to the economy and banking system. - Second-round effects: - Lower global demand would hurt exports to all major markets (US, China, EU) and hit business sentiment and economic activity more broadly. - Lower global commodity prices could provide a slight respite. - Higher exports to Vietnam from countries that face higher US tariffs could potentially disrupt domestic producers. - Reconfiguring supply chains could create temporary supply shortages and limit job creation. - High and persistent trade policy uncertainty could disrupt trade operations and investment decisions, reducing potential benefits from trade reallocation. ### Annex VI — Roadmap for a Macroprudential Toolkit - Key findings: - Vietnam’s macroprudential toolkit lags significantly behind ASEAN peers, particularly concerning borrower-based tools. - Enhancing the toolkit is crucial for financial stability and sustainable economic growth, allowing resilience to systemic risks (rapid credit expansion, asset price bubbles). - Strengthening macroprudential framework provides more efficient, targeted alternatives to aggregate credit ceilings or targets. - Vietnam’s aggregate Capital Adequacy Ratio ranks among the bottom five (based on IMF FSI data covering 112 countries) and is low relative to ASEAN peers. - Vietnamese banks generally apply Basel II standards, which have a less stringent definition of capital than Basel III. - Recommendations and phased approach: - Strengthen institutional framework to clarify SBV’s financial stability mandate, enhance capacity and readiness, and ensure coordination among authorities. - Strengthen systemic risk monitoring by enhancing data collection and introducing appropriate indicators—leveraging stress test results. - Consider a phased expansion of the toolkit: - Start with broad-based capital measures: capital conservation buffer, countercyclical capital buffer, and systemic institutions surcharge. - Introduce household-focused tools: loan-to-value or debt-service-to-income limits to contain excessive exposures, particularly in the real estate sector. - Publish Financial Stability Reports regularly to strengthen public communication, transparency, and accountability. - Charted context: Capital Adequacy Ratio (Percent) for Cambodia, Indonesia, Malaysia, Nepal, Philippines, Thailand, Vietnam across Y2019Q4–Y2025Q1; sources: FSI database and IMF staff calculations. ### Annex VII — Crypto assets in Vietnam - Adoption and data limitations: - Vietnam ranks among the top countries in crypto asset adoption. - Vietnam does not recognize crypto assets as a means of payment or unit of account but trading is not explicitly banned. - Vietnamese residents trade and invest in crypto assets through global exchanges, but no official data have been collected to estimate the size of transactions. - Crypto asset usage was ranked 5th globally (Chainalysis, 2024). - The government passed laws (effective from 2026) to recognize digital assets and develop a regulatory framework. - Scale and composition of flows (2024 and 2025:Q1): - Gross flows of on-chain crypto asset transactions amounted to US$173 billion in 2024 (38 percent of GDP). - Main counterparts of cross-border transactions: the U.S. and Korea. - Total gross inflows and outflows of stablecoins in 2024: - Inflows: US$54 billion. - Outflows: US$52 billion. - These values were up from US$5 billion in 2020. - Net stablecoin flows noted: - Net outflows of stablecoins: US$0.9 billion after domestic financial turmoil in 2022. - Net inflows of stablecoins: US$1.6 billion in April 2024 during repricing of future U.S. interest rate cuts. - Share of Top 5 Crypto Assets in Total Transactions in 2025:Q1: - Tether (usdt): 34% inflows, 34% outflows (stablecoin). - Bitcoin (btc): 26% inflows, 26% outflows (blockchain). - USD Coin (usdc): 20% inflows, 18% outflows (stablecoin). - Ethereum (eth): 10% inflows, 11% outflows (blockchain). - Total: 90% inflows, 89% outflows. - Balance of payments (BOP) and errors & omissions (E&Os): - Large increase in Vietnam’s E&Os in the BOP may be partly related to rise in unrecorded crypto transactions: - E&Os increased from less than US$10 billion before 2022 to averaging US$28 billion during 2022-24. - Methodological caveat: capital flows and E&Os in the BOP and estimated cross-border crypto asset flows are not directly comparable. - Gross crypto asset inflows generated by a non-resident purchasing crypto assets from a resident are not equivalent to capital inflows in the BOP which measure net changes in non-residents’ holdings of domestic assets. - Available data suggests the crypto FX premium may have been elevated in Vietnam in recent years, potentially enabling unrecorded FX outflows. - Recording and data collection challenges: - Cross-border flows via crypto assets may not be properly recorded in the BOP across financial, capital, and services accounts depending on presence of corresponding liabilities and transaction types. - Crypto asset lending and other activities could lead to inadequate coverage of cross-border financial activities and further add to E&Os. - Recommended phased approach for recording crypto asset transactions in the BOP: - Establish a well-defined framework for data collection: outline timeframe, frequency, data reporting templates, and compilation guidelines. - Explore alternative data sources: blockchain analytics, transaction data analysis, partnerships with industry players. - Collaborate with regulatory bodies and private stakeholders to mandate data requirements for crypto assets. - Risks and regulatory steps: - Risks: - Lack of comprehensive legal and supervisory framework exposes retail investors to fraud and operational failures and creates opportunities for illicit capital flows. - Widespread use of crypto assets in lieu of domestic currency can undermine monetary sovereignty, monetary policy, capital flow management, and heighten fiscal, financial stability, and operational risks. - Authorities’ steps: - New legal framework—the Law on Digital Technology Industry—to regulate the market. - Preparing a pilot program to license crypto-asset service providers. - Development of a fintech sandbox. - Suggested international coordination: legal certainty for crypto assets; robust prudential, conduct, and oversight requirements for all crypto market actors adhering to “same activity, same risk, same regulation”; implement strong AML/CFT measures; analyze and disclose fiscal risks associated with crypto assets; maintain effectiveness of capital flow management measures. - Data and methodology note: - This Annex’s analysis relies on estimated cross-border on-chain crypto asset transactions by Chainalysis; Chainalysis’ aggregation method is not aligned with international statistical recommendations of residence and economic ownership. - Since no centralized exchanges exist in Vietnam, some data is sourced from P2P buy and sell offers from Binance, representing only a subset of recorded crypto transactions (¶2). - Under the G-20 Data Gap Initiative on digital money, data templates have been produced to test collection of crypto assets data, including stablecoins, from custodians (see G20 DGI Recommendations). ### Annex VIII — Debt sustainability (figures referenced) - Annex VIII contains multiple figures related to: - Risk of Sovereign Stress. - Debt Coverage and Disclosures. - Public Debt Structure Indicators. - Baseline Scenario. - Realism of Baseline Assumptions. - Medium-Term Risk Assessment. - Long-Term Risk Analysis. - Figures are presented without accompanying numerical prose in the provided excerpt; sources and labels are part of Annex VIII. *International Monetary Fund.* ### Annex IX : Data Issues ### Annex IX : Data Issues ### FUND RELATIONS (As of June 30, 2025) - Membership Status - Joined: September 21, 1956. - General Resources Account (SDR Million; Percent of Quota) - Quota: 1,153.10; 100.00 - Fund holdings of currency: 1,153.10; 100.00 - Reserve position in Fund: 0.01; 0.00 - SDR Department (SDR Million; Percent Allocation) - Net cumulative allocation: 1,419.99; 100.00 - Holdings: 1,432.15; 100.86 - Outstanding Purchases and Loans: None - Latest Financial Arrangements (In millions of SDRs) - ECF1: Date of Arrangement 04/13/2001; Expiration Date 04/12/2004; Amount Approved 290.00; Amount Drawn 124.20 - ECF1: Date of Arrangement 11/11/1994; Expiration Date 11/10/1997; Amount Approved 362.40; Amount Drawn 241.60 - Stand-By: Date of Arrangement 10/06/1993; Expiration Date 11/11/1994; Amount Approved 145.00; Amount Drawn 108.80 - 1 Formally PRGF. - Projected Payments to Fund (In millions of SDRs; based on existing use of resources and present holdings of SDRs) - Forthcoming 2025 2026 2027 2028 2029 - Principal: [no amounts reported] - Charges/interest: 0.01 0.01 0.01 0.01 - Total: 0.01 0.01 0.01 0.01 ### EXCHANGE RATE ARRANGEMENTS - De facto arrangement: classified as crawl-like. - De jure arrangement: managed floating. - SBV policy and reforms: - August 2015: widened VND/USD trading band to +/-3 percent from +/-1 percent; devalued central parity by one percent. - October 2022: widened trading band to +/-5 percent from +/-3 percent. - January 2016: announced daily VND/USD adjustment based on: - previous day’s weighted average VND/USD exchange rate; - a weighted average of movements in VND exchange rates vis-à-vis seven other important trading partners’ currencies; - domestic macroeconomic conditions. - Article VIII acceptance: Vietnam has accepted obligations under Article VIII, Section 2, 3, and 4 and maintains an exchange system free of multiple currency practices and restrictions on current international transactions, except for exchange restrictions imposed for security reasons (notified pursuant to Executive Board Decision No. 144-(52/51)). ### ARTICLE IV CONSULTATIONS & TECHNICAL ASSISTANCE - Consultation cycle: 12-month. Previous Article IV: in-person June 12-26, 2024; concluded by Executive Board on August 30, 2024. - Technical Assistance (TA) areas (recent years): - Statistics: government finance (GFS), external sector (ESS), monetary and financial (MFS), prices, national accounts. - Debt management; tax administration; fiscal risks; liberalization of capital controls on external debt; foreign exchange reserve management; crypto asset supervision and regulation. - Bank stress testing; macroeconomic frameworks; Forecasting and Policy Analysis System (FPAS). - Notable TA and program milestones: - IMF-World Bank Financial Sector Assessment Program: 2012–13. - Financial Sector Stability Review (FSSR): 2021–23; FSSR report approved by SBV management. - FSSR follow-up TA with State Securities Commission on crypto regulatory framework started May 2025. - TA to SBV on bank stress testing started July 2025. - ICD multi-year TA on FPAS started 2019; Phase I completed early 2022; Phase II started April 2022 and successfully completed September 2024. - 2022–23: TA from Fiscal Affairs Department and CDOT on tax administration, compliance risk management, Treasury cash management, internal audit, chart of accounts. - TA and training provided for medium-term debt strategy, debt management institutional arrangements, customs modernization, pension fund modeling, SOE financial risk management. - MCM multi-year project on strengthening SBV Internal Audit started August 2022. - LEG multi-year project to strengthen AML/CFT legal frameworks and risk-based AML supervision started November 2022. - STA provided TA on GFS and ESS (with CDOT), prices and national accounts statistics. - April 2023: STA TA to help SBV transition to new financial soundness indicators (FSIs) compiling format. - November 2023: STA and CDOT TA to assist Ministry of Finance in preparation of GFS aligned to international standards. - 2024-25: STA and CDOT TA to help SBV evaluate source data and estimation methodologies for compiling BOP and upgrade legal framework on BOP and IIP. - April 2024: STA TA for rebasing of national accounts and development of Residential Property Price Indices. ### RESIDENT REPRESENTATIVE - Mr. Jochen Schmittmann: Resident Representative for Vietnam, Cambodia, and Lao P.D.R., based in Hanoi, since August 2023. ### RELATIONS WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS - World Bank and Asian Development Bank referenced as partners. ### STATEMENT BY THE VIETNAMESE AUTHORITIES (September 8, 2025) - Opening - Authorities thanked the IMF Article IV mission team; broadly agreed with staff’s assessment and recommendations. - Administrative reform: In June 2025, reduced centrally governed provinces and cities from 63 to 34; transitioned from a three-tier to a two-tier local government system by eliminating district-level administration. - Recent developments in H1 2025 and outlook - GDP growth H1 2025: 7.52% expansion (highest in 15 years). - Inflation: Consumer Price Index rose to 3.57% in June (below government target). - Investment: - Total social investment rose by 9.8% (vs. 6.6% during same period of 2024). - Foreign direct investment: USD 11.72 billion in H1 2025; an 8.1% increase. - Vietnamese outbound investment: 86 newly licensed projects totaling USD 357.7 million. - Trade: surged by 16.1%; total trade reached USD 432.03 billion. - Government growth target for 2025: 8% or higher, with coordinated strategy including accelerated public investment disbursement. - Fiscal Policy - State budget revenue rose by 28.3% in H1 2025; expenditure increased by 38.5% in H1 2025. - Extension of 2% VAT reduction on selected goods and services through 2026. - Public investment execution: - Disbursement reached 36.01% of the Prime Minister’s plan in H1 2025; rose to 43.9% by end-July. - Nearly 7% disbursed in July alone. - Authorities target 100% disbursement for 2025. - Ministries/agencies reviewing 2021–2025 Public Finance Plan to inform 2026–2030 strategy prioritizing public investment in key infrastructure. - Monetary Policy - SBV maintains policy interest rates to contain inflation while ensuring favorable financing conditions. - Money supply (by end-June 2025): expanded by 7.09%. - Credit growth (by end-June 2025): reached 8.30%. - Capital mobilization (by end-June 2025): rose by 6.11%. - Exchange rate (year-to-date appreciation): 2.95% to 25,052 VND/USD at end-June. - SBV committed to flexible exchange rate management, intervening to limit excessive volatility and build reserves when market conditions allow. - Banking Sector Development Strategy initiatives: strengthen policy transmission, forecasting, communication; refine FPAS. - Transition efforts: reduce use of credit ceilings; credit growth ceilings no longer applicable to foreign commercial banks, joint venture banks, the Cooperative Bank, and non-bank finance institutions; roadmap being developed for transition to indirect policy tools; compliance with risk weights and provisioning for high-risk sectors closely monitored. - Financial Sector - Resilient and stable; ample liquidity and strengthened institutional frameworks. - Net profit after tax: rose by 16.1% in 2024. - Ratio of impaired assets: declined to 5.16% as of March 2025. - Legal reform: June 2025—National Assembly passed amendment to Law on Credit Institutions to facilitate liquidation procedures of collateral assets and enhance resolution of non-performing loans; amended Law effective from October 2025. - Banking system near completion of 2021–2025 restructuring roadmap; institutions strengthened capital buffers and governance. - Progress on resolution plan for Saigon Commercial Bank guided by investor proposals and regulatory oversight. - Structural Reform - Reform program guided by four landmark Resolutions (implementation 2025–2030) to drive technological adoption, innovation, digital transformation, international integration, legal reform, and private sector development. - Government streamlined institutional framework: reduced five ministries, one ministerial-level agency, and three government-affiliated units. - Legislative plans: government to submit a legislative package to the National Assembly in October 2025, including updates to laws governing economics, finance, statistics, and public administration. - Revised law on statistics: to align national data practices with international standards and the new administrative structure; advance National Statistical Strategy through 2030. - With IMF support, SBV has compiled the International Investment Position (IIP) index and is laying the legal foundation for its publication and adopting other modern statistical methodologies. - AML/CFT progress: - Since November 2024, SBV used IMF’s AML/CFT toolkit to conduct banking-sector risk assessment and updated 2025 inspection plan. - SBV engaged with FATF/APG Joint Working Group to pursue follow-up measures after completing National AML/CFT Action Plan in 2025. - Authorities’ outlook: committed to sound macroeconomic policies, robust regulatory and supervisory frameworks, advancing structural reforms, and deepening collaboration with the Fund. *Source: Annex IX : Data Issues, Vietnam Staff Report for the 2025 Article IV Consultation — Informational Annex (as provided).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1vnmea2025001-source-pdf.pdf_