Vietnam: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Vietnam

IMF Staff Country Reports, September 27, 2023

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Canonical URL: Vietnam: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Vietnam

Vietnam experienced a robust post-pandemic economic recovery in 2022, attributed to strong economic fundamentals and prudent public health management during the pandemic.
In 2023, high private debt and rising global interest rates led to a liquidity crunch that distressed highly leveraged sectors, in particular real estate.
The corporate bond market came to a halt, and nonperforming loans rose.
Economic activity decelerated sharply in the first half of 2023.
The government managed to stabilize the markets, but risks remain elevated.
The report calls for a comprehensive, multi-pronged response by the government to address multiple headwinds.
Achieving ambitious medium-term growth and climate goals requires accelerating reforms to improve the business environment, critical infrastructure, and human capital.

2022: Robust post-pandemic recovery supported by strong fundamentals and prudent public health management.
First half of 2023: Sharp deceleration in economic activity.
Elevated risks due to:
- High private debt.
- Rising global interest rates.
- Liquidity crunch in highly leveraged sectors, especially real estate.
- Halt in the corporate bond market.
- Increase in nonperforming loans.

Highly leveraged sectors, notably real estate, experienced severe liquidity stress.
Corporate bond issuance effectively stopped.
Nonperforming loans increased, reflecting stress transmission to the banking sector.
Government actions stabilized markets, but vulnerabilities persist.

Implement a comprehensive, multi-pronged government response to the current headwinds.
Accelerate far-reaching reforms to:
- Improve the business environment.
- Upgrade critical infrastructure.
- Strengthen human capital.
These reforms are presented as necessary to meet ambitious medium- and long-term objectives of sustained high and green economic growth and to achieve medium-term growth and climate goals.

Subject: Corporate bonds, Financial crises, Financial institutions, Financial markets, Fiscal policy, International organization, Monetary policy, Revenue administration, Securities markets
Keywords: Corporate bonds, Global, monetary policy decision-making process, policy buffer, Securities markets, State budget, U.S. dollar, USD trading band