Vietnam: Selected Issues

IMF Staff Country Reports, July 10, 2018

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The paper assesses how Vietnam's structural transformation has affected its growth potential.
The analysis concludes that Vietnam’s medium-term growth potential has increased from 6.2 percent estimated in 2014 to 6.5 percent.
On balance, the potential growth estimate in Vietnam is assessed at 6.5 percent in 2017, higher than previous staff estimates of 6.2.
The output gap is estimated at 0.4 percent in 2017.
The paper notes that acceleration of reforms that have generated productivity gains in the last decade, including the implementation of agreed free trade agreements, could further boost growth potential.
The analysis will be extended further in a forthcoming paper.

A range of methodologies (four methodologies) provide a range of estimates for Vietnam’s potential output.
Production function estimates can be improved by:
- Explicitly incorporating the effect of structural transformation due to labor reallocation into the model.
- Better accounting for the impact of the quality of human capital accumulation by taking the quality of education into account.
Improvements in data quality could further enhance the analysis. Examples cited:
- Real estate prices
- Quarterly gross domestic product
- Unemployment rate and labor force in the informal sector
- Capacity utilization

Subject: Asset and liability management, Credit, Credit gaps, Debt limits, Expenditure, Financial sector policy and analysis, Potential output, Production, Total factor productivity
Keywords: CR, Credit gaps, credit-to-GDP ratio, debt anchor, Debt limits, debt rule, Global, house price misalignment, IMF staff estimate, ISCR, potential GDP, Potential output, Total factor productivity, Vietnam