{
  "title": "Consultative Group Meeting for Vietnam",
  "publication": "IMF News, December 4, 2009",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/29/18/04/dm120309",
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  "summary": "Vietnam is \"weathering the global crisis better than many other countries.\"",
  "publishDate": "2009-12-04",
  "sections": [
    {
      "heading": "Recent Economic Developments",
      "content": "- Vietnam is \"weathering the global crisis better than many other countries.\"\n- Real GDP growth projection for 2009: 5¼ percent.\n- Drivers of resilience:\n  - Private sector strength.\n  - Government stimulus program (monetary policy easing and a sizable fiscal package) boosting domestic demand, underpinning recovery in industrial production and maintaining robust retail sales.\n- Costs and emerging risks from stimulus:\n  - Trade deficits: $3½ billion in the third quarter.\n  - Residents shifted portfolios toward gold and other foreign currency assets.\n  - Dong depreciation pressure, with parallel market exchange rates recently trading up to 10 percent outside of the official band.\n  - Gross international reserves fallen to below 2½ months of imports.\n  - Difficult access to foreign exchange, imposing costs on enterprises and affecting investor sentiment."
    },
    {
      "heading": "Economic Outlook for Vietnam (projections and risks)",
      "content": "- Near-term view: likely to remain challenging; global recovery supportive but uncertain, posing risks to exports, private remittances, and FDI.\n- IMF projections for 2010:\n  - Growth: 6 percent.\n  - Inflation: likely to rise to double digits from around 7 percent in 2009.\n  - Balance of payments:\n    - Assumes government narrows current account deficit to 7½ percent of GDP from an estimated 8¾ percent in 2009.\n    - Assumes reversal of resident portfolio shift toward foreign currency assets.\n    - If FDI and official development assistance flows remain firm, modest recovery of gross international reserves in 2010 is possible.\n- Risks:\n  - Downside risk from global recovery uncertainty.\n  - Greater risk: re-emergence of macroeconomic instability similar to 2008, which would constrain stimulus scope."
    },
    {
      "heading": "Addressing Macroeconomic Risks — Policy Recommendations",
      "content": "- Immediate priority: address emerging risks without disrupting economic activity and restore normal business conditions.\n- Monetary and exchange rate policy:\n  - Tighten monetary policy and restore orderly conditions in the foreign exchange market.\n  - Welcomed SBV steps: increase in policy interest rates and exchange rate adjustment.\n  - Phase out short-term interest subsidy scheme on schedule at end-December 2009.\n  - SBV should remain vigilant, be given greater authority to adjust monetary and exchange rate policy in a timely manner.\n  - Remove the cap on lending rates.\n  - Combine clear signals with a sound fiscal framework to boost credibility of monetary policy and restore confidence in the dong.\n- Fiscal policy:\n  - IMF preliminary estimate: overall fiscal deficit (including off-budget expenditures and net lending) could widen from an estimated 4½ percent of GDP in 2008 to about 9 percent of GDP in 2009.\n  - 2010 budget plan welcomed; IMF estimates it will reduce the overall fiscal deficit by about 2 percentage points of GDP to around 6½ percent of GDP.\n  - Fiscal policy should be implemented flexibly; further tightening may be needed if external pressures intensify."
    },
    {
      "heading": "Safeguarding the Financial System",
      "content": "- Banks' position:\n  - Vietnamese banks have come through the global crisis relatively well so far, due to strong profits, capital-raising efforts, and limited exposure to global financial markets.\n- Concerns:\n  - Absence of reliable information on the banking system.\n  - Capital base of some large banks remains weak.\n  - Profit margins squeezed by a lending rate cap and increasing deposit rates.\n  - Loan portfolio strength and liquidity positions may be tested if liquidity tightens and conditions weaken.\n- Recommendation:\n  - Authorities' willingness to participate in a financial sector assessment program (FSAP) is welcomed to provide a clearer picture and guide reforms of the regulatory regime and enhance confidence of rating agencies and other observers."
    },
    {
      "heading": "Structural Reforms and Data/Communication",
      "content": "- Maintain momentum of structural reforms in the next ten-year strategy and five-year plan to modernize infrastructure and management of the economy.\n- Encourage using pending banking and budget legislations to modernize frameworks for monetary and fiscal management and develop institutions for a 21st century economy.\n- Information and communication improvements:\n  - SBV steps to improve quality and timeliness of monetary and reserve data are encouraging.\n  - Significant shortcomings remain in data on fiscal, state-owned enterprise, and banking operations.\n  - Improving the government’s communication strategy by regularly presenting clear assessments of the economic situation and policy direction would help manage market expectations and prevent disorderly adjustments."
    },
    {
      "heading": "Closing",
      "content": "- IMF reiterates continued commitment to providing Vietnam with policy advice and support at this difficult juncture.\n\nStatement by Mr. Shogo Ishii, Assistant Director, Asia and Pacific Department — Hanoi, December 3–4, 2009\n\n---\n\n\n References\n\n- Vietnam and the IMF\n- Statements at Donor Meetings\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/29/18/04/dm120309"
    }
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    "Published: December 4, 2009",
    "Vietnam is \"weathering the global crisis better than many other countries.\"",
    "Real GDP growth projection for 2009: 5¼ percent.",
    "Drivers of resilience:",
    "Costs and emerging risks from stimulus:",
    "Near-term view: likely to remain challenging; global recovery supportive but uncertain, posing risks to exports, private remittances, and FDI.",
    "IMF projections for 2010:",
    "Risks:",
    "Immediate priority: address emerging risks without disrupting economic activity and restore normal business conditions.",
    "Monetary and exchange rate policy:",
    "Fiscal policy:",
    "Banks' position:",
    "Concerns:",
    "Recommendation:",
    "Maintain momentum of structural reforms in the next ten-year strategy and five-year plan to modernize infrastructure and management of the economy.",
    "Encourage using pending banking and budget legislations to modernize frameworks for monetary and fiscal management and develop institutions for a 21st century economy.",
    "Information and communication improvements:",
    "IMF reiterates continued commitment to providing Vietnam with policy advice and support at this difficult juncture.",
    "[Vietnam and the IMF](http://www.imf.org/external/country/VNM/index.htm)",
    "[Statements at Donor Meetings](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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