IMF Executive Board Concludes 2024 Article IV Consultation with Vietnam
IMF News, September 27, 2024
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- Published: September 27, 2024
Recent economic performance and 2023 developments
- The Vietnamese economy grew by 5 percent in 2023.
- Key headwinds in 2023: turbulence in the real estate sector, financial distress, and a significant drop in exports.
- A recovery began in late 2023, driven by a rebound in exports, tourism, and appropriately expansionary fiscal and monetary policy support.
- Inflation picked up in 2024, driven mainly by rising food prices; core inflation remained relatively low and stable.
- The external current account posted a large surplus in 2023, at 5.8 percent of GDP, mainly reflecting a significant contraction in imports.
2024–2025 outlook and projections
- Real GDP growth is projected at 6.1 percent in 2024.
- Growth drivers cited: continued strong external demand, resilient foreign direct investment, and accommodative policies.
- Domestic demand growth expected to recover gradually as corporates navigate high debt levels; full recovery of the real estate sector is expected only over the medium term.
- Inflation is expected to hover around the State Bank of Vietnam’s target of 4-4.5 percent in 2024.
- Downside risks highlighted:
- Weaker exports if global growth disappoints, geopolitical tensions persist, or trade disputes intensify.
- Prolonged exchange rate pressures could lead to larger pass-through to domestic inflation given easy monetary conditions.
- Persistent weakness in the real estate sector and corporate bond market could hinder banks’ credit expansion, hurt growth, and undermine financial stability.
Executive Board assessment — key messages and policy recommendations
- Commendation for authorities’ swift actions to maintain macro-financial stability amid domestic and external headwinds.
- Overall judgement: Risks remain elevated; further efforts are required to safeguard macro-financial stability and deepen reforms for robust, green, and inclusive medium-term growth. Continued capacity development is important.
- Fiscal policy:
- Given ample fiscal space and limited room for monetary policy loosening, fiscal policy should take the lead in supporting activity if needed.
- Directors welcomed plans to speed up implementation of public investment, noting this will require tackling bottlenecks.
- Stressed importance of expanding social safety nets to support the most vulnerable.
- Recommended strengthening the fiscal framework and budget process and increasing revenue mobilization over the medium term.
- Monetary and exchange rate policy:
- Commended authorities for containing inflation risks; monetary policy should continue to be cautious given a complex environment and limited policy space.
- Welcomed steps toward greater exchange rate flexibility and encouraged ongoing progress and modernization of the monetary policy framework.
- Financial sector:
- Urged strengthening resilience by bolstering capital buffers, phasing out regulatory forbearance, and addressing rising non-performing loans.
- Recommended enhancing the toolkit to prevent and manage banking crises by strengthening resolution and emergency liquidity frameworks; welcomed ongoing revision of the law on credit institutions.
- Called for continued efforts to strengthen bank regulation and supervision.
- Real estate and corporate bond market:
- Acknowledged swift actions to contain risks; urged decisive steps to address remaining risks, including strengthening the insolvency framework, bolstering institutions, and increasing transparency in the corporate bond market.
- Structural and climate-related reforms:
- Emphasized the importance of structural and climate reforms to achieve sustainable, green, and inclusive growth and to accelerate transition to upper-middle income status.
- Recommended improving the business environment, stepping-up critical infrastructure, and investing in human capital.
- Welcomed the latest Power Development Plan and the planned Emissions Trading System; emphasized the need to implement the strategy, develop an appropriate regulatory framework to promote investment in renewable energy, and secure funding for the green transition.
- Suggested conducting a Climate-Public Investment Management Assessment.
- Governance, AML/CFT, and data:
- Welcomed anti-corruption efforts; emphasized continued strengthening of governance, improving the AML/CFT framework, and simplifying regulatory frameworks.
- Highlighted the importance of greater efforts in closing data gaps.
Selected economic indicators (2020–2025) — key figures
- Real GDP (percent change): 2020: 2.9; 2021: 2.6; 2022: 8.1; 2023: 5.0; 2024: 6.1.
- Output Gap (percent of potential GDP): 2020: -0.4; 2021: -1.9; 2022: 0.0; 2023: -0.6; 2024: -0.3; 2025: -0.2.
- CPI (period average): 2020: 3.2; 2021: 1.8; 2022: 3.3; 2023: 4.1; 2024: 3.5.
- Core inflation (period average): 2020: 2.3; 2021: 0.9; 2022: 2.7; 2023: 4.2; 2024: 3.6; 2025: 3.4.
- Gross national saving (in percent of GDP): 2020: 36.3; 2021: 30.7; 2022: 32.9; 2023: 37.7; 2024: 35.2.
- Gross investment (in percent of GDP): 2020: 31.9; 2021: 32.6; 2022: 32.0; 2023: 32.2; 2024: 32.5.
- Private: 2020: 24.9; 2021: 26.7; 2022: 26.3; 2023: 25.0; 2024: 25.5; 2025: 25.7.
- Public: 2020: 7.0; 2021: 6.2; 2022: 6.3; 2023: 6.9; 2024: 6.7.
- State budget finances (in percent of GDP) — Revenue and grants: 2020: 18.4; 2021: 18.7; 2022: 19.0; 2023: 17.1; 2024: 17.6.
- Expenditure (in percent of GDP): 2020: 21.3; 2021: 20.1; 2022: 18.3; 2023: 19.5; 2024: 20.2; 2025: 20.7.
- Expense: 2020: 14.3; 2021: 13.9; 2022: 12.0; 2023: 12.6; 2024: 13.5; 2025: 13.8.
- Net lending (+)/borrowing (-) (percent of GDP): 2020: -2.9; 2021: -1.4; 2022: 0.7; 2023: -2.5; 2024: -2.6; 2025: -2.2.
- Public and publicly guaranteed debt (end of period, percent of GDP): 2020: 41.3; 2021: 39.2; 2022: 34.7; 2023: 34.4; 2024: 33.8; 2025: 33.2.
- Broad money (M2, percent change, end of period): 2020: 14.5; 2021: 10.7; 2022: 12.5; 2023: 11.4; 2024: 8.0.
- Credit to the economy (percent change, end of period): 2020: 11.6; 2021: 14.0; 2022: 13.7; 2023: 12.9; 2024: 9.5.
- Current account balance (including official transfers, percent of GDP): 2020: 4.3; 2021: 0.3; 2022: 5.8; 2023: 3.0.
- Exports f.o.b. (percent of GDP): 2020: 81.6; 2021: 90.8; 2022: 91.1; 2023: 81.8; 2024: 81.0; 2025: 79.6.
- Imports f.o.b. (percent of GDP): 2020: 72.7; 2021: 86.6; 2022: 83.9; 2023: 71.6; 2024: 73.0.
- Capital and financial account (percent of GDP): 2020: 2.4; 2021: 8.3; 2022: -0.7; 2023: -4.8.
- Gross international reserves (in billions of U.S. dollars): 2020: 95.2; 2021: 109.4; 2022: 86.7; 2023: 92.3; 2024: 84.0; 2025: 97.9.
- Total external debt (end of period, percent of GDP): 2020: 37.6; 2021: 37.9; 2022: 35.5; 2023: 32.7; 2024: 32.8.
- Nominal exchange rate (dong/U.S. dollar, end of period): 2020: 23,098; 2021: 22,826; 2022: 23,633; 2023: 23,929.
- GDP (in billions of U.S. dollars, current prices): 2020: 346.3; 2021: 370.1; 2022: 408.0; 2023: 433.7; 2024: 468.5; 2025: 506.4.
- Per capita GDP (in U.S. dollars): 2020: 3,549; 2021: 3,757; 2022: 4,102; 2023: 4,324; 2024: 4,649; 2025: 4,986.
Source: IMF Executive Board conclusions on the 2024 Article IV Consultation with Vietnam (concluded August 30, 2024).
