IMF Executive Board Concludes 2022 Article IV Consultation with Vietnam
IMF News, July 5, 2022
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- Published: July 5, 2022
Executive summary and context
- The Executive Board concluded the Article IV consultation with Vietnam on July 5, 2022.
- Vietnam entered the pandemic with robust economic growth and sound fundamentals, characterized by prolonged high growth, price stability, low public debt ratios, strong FDI and trade flows, and relatively strong banking sector position.
- COVID-19 caused major disruptions; successful containment in 2020 made Vietnam the regional top-performing economy, but a severe outbreak in April 2021 produced a historical contraction in 2021Q3.
- A fast vaccination rollout enabled a shift from a zero-tolerance strategy toward living with the virus.
- Policy support helped cushion the pandemic’s impact; the government maintained fiscal, external, and financial stability.
Near-term outlook and macroeconomic projections
- Recovery underway with high-frequency indicators pointing to stronger momentum going into 2022: rising retail sales, industrial production, and firm entry.
- Growth projection:
- Real GDP growth expected to reach 6 percent in 2022.
- Real GDP (percent change) historical and projections: 2018: 7.2; 2019: 2.9; 2020: 2.6; 2021: 2.6; 2022 (proj): 6.0; 2023 (proj): [table shows 6.0 for 2022 and blank for 2023 in top line but Table lists 2023 values elsewhere].
- Labor market: recovery lagging; underemployment remains high.
- Inflation:
- CPI (period average): 2018: 3.5; 2019: 2.8; 2020: 3.2; 2021: 1.9; 2022 (proj): 3.8; 2023 (proj): 3.7.
- CPI (end of period): 2018: 3.0; 2019: 5.2; 2020: 0.2; 2021: 1.8; 2022 (proj): 3.9.
- Core inflation (end of period): 2018: 1.7; 2019: 1.0; 2020: 0.8; 2021: 2.3.
- Although inflation picked up due to rising commodity prices and supply-chain disruptions, it remained well below the central bank’s inflation ceiling because of economic slack and relatively stable food and administered prices.
Fiscal, monetary, and financial sector assessment
- Fiscal policy:
- Expected to remain supportive, notably via the Program for Recovery and Development (PRD).
- Directors emphasized fiscal policy should take the lead and be flexibly adjusted to evolving conditions.
- Encouraged gradual fiscal adjustment when recovery is entrenched, with focus on revenue mobilization to create space for spending on social, climate, and other development objectives.
- Monetary policy:
- Expected to remain vigilant to inflationary risks.
- Directors called for monetary policy to be nimble and vigilant of inflationary risks and welcomed steps toward greater exchange rate flexibility and monetary policy modernization.
- Financial sector risks and recommendations:
- Risks associated with problem loans, real estate, and corporate bond markets should be closely monitored.
- Need to normalize regulatory forbearance in a timely fashion.
- Over the medium term, bank capital positions need strengthening.
- Macroprudential and private debt restructuring frameworks should be enhanced.
- Directors welcomed efforts to strengthen the AML-CFT framework and data frameworks.
Executive Board Assessment — key messages
- Directors commended authorities for cushioning the pandemic’s impact while maintaining fiscal, external, and financial stability, and for the vaccination rollout.
- Noted the recovery is strong but uneven: labor market lags, rising financial sector vulnerabilities, and longstanding structural challenges.
- Risks are to the downside; directors called for agile policymaking adjusted to the pace of recovery and risk evolution.
- Structural reforms were emphasized to improve the business environment, enhance productivity, and boost potential growth:
- Priority areas: reducing labor skill-mismatches, promoting digital transformation, ensuring a level playing field particularly for SMEs.
- Praised Vietnam’s ambitious environmental agenda and urged translating targets into concrete policy actions.
- Encouraged continued efforts to improve economic institutions and strengthen governance and data frameworks.
- External position:
- Directors judged Vietnam’s external position in 2021 to be stronger than warranted by fundamentals and desirable policies.
- Called for continued efforts to boost domestic private investment and enhance social safety nets.
- Welcomed recent steps towards greater exchange rate flexibility and monetary policy modernization and encouraged continued efforts in this direction.
Key statistics and indicators (selected from Table 1)
- Output and gaps:
- Output Gap (percent of GDP): 2018: -0.3; 2019: 1.2; 2020: -2.4; 2021: -2.1; 2022 (proj): -1.2.
- Saving and investment (in percent of GDP):
- Gross national saving: 2018: 33.8; 2019: 35.5; 2020: 36.5; 2021: 32.3; 2022 (proj): 36.1; 2023 (proj): 37.0.
- Private saving: 2018: 30.0; 2019: 31.2; 2020: 34.5; 2021: 29.6; 2022 (proj): 35.6.
- Public saving: 2018: 4.3; 2019: 2.0; 2020: 2.7; 2021: 0.5; 2022 (proj): 0.6.
- Gross investment: 2018: 31.9; 2019: 31.8; 2020: 32.1; 2021: 33.4; 2022 (proj): 35.4; 2023 (proj): 35.7.
- State budget finances (in percent of GDP):
- Revenue and grants: 2018: 19.5; 2019: 19.6; 2020: 18.5; 2021: 18.6; 2022 (proj): 16.7; 2023 (proj): 16.8.
- Expenditure: 2018: 20.6; 2019: 20.0; 2020: 22.4; 2021: 22.1; 2022 (proj): 21.3; 2023 (proj): 21.4.
- Net lending (+)/borrowing (-) (gross) 1/: 2018: -1.0; 2019: -0.4; 2020: -3.9; 2021: -3.5; 2022 (proj): -4.7.
- Net lending /borrowing including EBFs: 2018: 0.4; 2019: 0.3; 2020: -2.8; 2021: -2.5; 2022 (proj): -3.8.
- Public and publicly guaranteed debt (end of period): 2018: 43.7; 2019: 41.3; 2020: 41.7; 2021: 39.7; 2022 (proj): 40.5; 2023 (proj): 40.8.
- Money and credit (percent change, end of period):
- Broad money (M2): 2018: 12.4; 2019: 14.8; 2020: 14.5; 2021: 10.7; 2022 (proj): 11.3; 2023 (proj): 13.0.
- Credit to the economy: 2018: 12.7; 2019: 12.8; 2020: 11.6; 2021: 13.5; 2022 (proj): 14.3.
- Balance of payments (in percent of GDP unless otherwise indicated):
- Current account balance (including official transfers): 2018: 4.4; 2019: 1.3; 2020: [table omitted a 2020 value]; 2021: [table omitted].
- Exports f.o.b.: 2018: 80.4; 2019: 80.6; 2020: 82.4; 2021: 91.8; 2022 (proj): 92.9; 2023 (proj): 91.5.
- Imports f.o.b.: 2018: 74.9; 2019: 74.1; 2020: 73.5; 2021: 87.0; 2022 (proj): 86.3; 2023 (proj): 84.0.
- Capital and financial account: 2018: 5.8; 2019: 2.5; 2020: 8.4.
- Gross international reserves (in billions of U.S. dollars) 5/:
- 2018: 55.3; 2019: 78.5; 2020: 95.2; 2021: 109.4; 2022 (proj): 125.5; 2023 (proj): 146.6.
- In months of prospective GNFS imports: 2018: 3.4; 2019: 3.6; 2020: [table omitted].
- Total external debt (end of period): 2018: 37.3; 2019: 36.4; 2020: 35.3; 2021: 34.8.
- Nominal exchange rate (dong/U.S. dollar, end of period): 2018: 23,175; 2019: 23,173; 2020: 23,098; 2021: 22,792.
- Real effective exchange rate (end of period): 2018: 127.5; 2019: 129.4; 2020: 124.3.
- Memorandum items (current prices):
- GDP (in billions of U.S. dollars): 2018: 303.1; 2019: 327.9; 2020: 342.9; 2021: 366.2; 2022 (proj): 408.4; 2023 (proj): 462.4.
- Per capita GDP (in U.S. dollars): 2018: 3,202; 2019: 3,398; 2020: 3,514; 2021: 3,718; 2022 (proj): 4,108; 2023 (proj): 4,611.
Policy recommendations and priorities
- Fiscal:
- Take the lead and be flexibly adjusted to evolving conditions.
- Ensure PRD deployment emphasizes targeting, spending efficiency, and steadfast implementation.
- Gradual fiscal adjustment when recovery is entrenched; prioritize revenue mobilization for social, climate, and development spending.
- Monetary and exchange rate:
- Remain nimble and vigilant to inflationary risks.
- Continue modernization and greater exchange rate flexibility.
- Financial sector:
- Monitor problem loans, real estate, and corporate bond markets closely.
- Normalize regulatory forbearance in a timely fashion.
- Strengthen bank capital positions and enhance macroprudential and private debt restructuring frameworks.
- Structural reforms:
- Improve business environment and productivity; boost potential growth.
- Priorities: reduce labor skill-mismatches, promote digital transformation, ensure level playing field for SMEs.
- Translate environmental targets into concrete policy actions.
- Improve economic institutions, governance, AML-CFT framework, and data frameworks.
- External sector:
- Boost domestic private investment and enhance social safety nets given external position stronger than warranted by fundamentals.
Source: International Monetary Fund press release, July 5, 2022.
Content in this bundle
- Ban Điều hành IMF Kết luận Đợt Tham vấn Điều IV Năm 2022 với Việt Nam