## IMF Staff Completes 2024 Article IV Mission to Vietnam

_IMF News, June 26, 2024_

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## Bibliographic details
- Published: June 26, 2024

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### Key projections and economic overview
- Vietnam’s economy is projected to expand by close to 6 percent in 2024, up from 5 percent in the previous year.
- Growth drivers: a recovering export sector, robust foreign direct investment, and policy support.
- Inflation is expected to hover around the SBV’s target of 4-4.5 percent in 2024.
- External current account: posted a large surplus in 2023, 5.8 percent of GDP, mainly reflecting a significant contraction in imports.

### Mission timing and engagement
- Mission dates: June 12-26, 2024.
- IMF team lead: Paulo Medas.
- Meetings with: Prime Minister Pham Minh Chinh; senior officials of the State Bank of Vietnam (SBV), the Ministry of Finance, the Ministry of Planning and Investment, the Central Economic Commission, the National Assembly; and representatives from the private sector, think tanks, academia, and other stakeholders.
- Press officer contact listed: Huong Lan Pinky Vu, Phone: +1 202 623-7100, Email: MEDIA@IMF.org.

### Recent performance and near-term outlook
- 2023 performance: economy grew 5 percent despite turbulence in the real estate sector, financial distress, and a significant drop in exports.
- Recovery began in late 2023, fueled by a rebound in exports, tourism, and appropriately expansionary fiscal and monetary policy support.
- Inflation dynamics: picked up in the first quarter of 2024, driven partly by rising food prices; core inflation remained relatively low and stable.
- Domestic demand: expected to remain subdued as corporates navigate high debt levels; the real estate sector will only fully recover over the medium term.

### Downside risks and scenarios
- External risks:
  - Exports could weaken if global growth disappoints, global geopolitical tensions persist, or trade disputes intensify.
- Domestic risks:
  - Persistent weakness in the real estate sector and corporate bond market could weigh on banks’ ability to expand credit, hurt economic growth, and undermine financial stability.
  - Given easy monetary conditions, prolonged exchange rate pressures could lead to a larger pass-through to domestic inflation.
- Policy response conditionality:
  - SBV should stand ready to tighten monetary policy if upward price pressures were to intensify.
  - Policies may need to adjust in response to significant risks to the outlook despite being highly supportive in 2024.

### Monetary and exchange rate guidance
- Maintain readiness to tighten monetary policy if inflation pressures increase.
- Over time, increase exchange rate flexibility in tandem with further modernization of monetary policy toward inflation targeting to better manage external shocks while safeguarding foreign exchange reserve buffers.

### Fiscal recommendations
- Fiscal policy is supporting growth in 2024 given the expected large public wage increase and ongoing efforts to accelerate public investment.
- Strengthen fiscal management by:
  - Improving the composition and quality of public spending and services.
  - Strengthening fiscal planning to better reflect the medium-to long-term implications of aging and climate.
  - Enhancing safety nets.
  - Intensifying revenue mobilization to create resources for social spending, climate action, and infrastructure investment.

### Financial sector recommendations
- New Law on Credit Institutions is an important step forward and should be followed by further measures to strengthen supervision and governance of financial institutions.
- Additional efforts needed to restore banking sector health:
  - Improve asset quality.
  - Phase out forbearance measures.
  - Raise bank capital.
  - Accelerate resolution of failed banks to limit eventual costs and improve financial and monetary system functioning.
- Strengthen insolvency framework and debt enforcement to accelerate corporate restructuring and increase resilience.
- Revise land and other real estate laws to address legal bottlenecks; further restructure weak developers and promote a sound corporate bond market.

### Structural reforms and medium-term priorities
- A new wave of reforms is needed to sustain high economic growth amid less-favorable demographics and climate change challenges.
- Key priorities:
  - Increase productivity.
  - Further invest in human and physical capital.
  - Incentivize private investment in renewable energy.
  - Improve functioning of capital markets, including developing a market-based sovereign bond market to facilitate broader capital market development and make monetary policy transmission more effective.
- Governance and transparency:
  - Strengthen preventative anti-corruption institutions, economic governance, and transparency.
  - Reduce legal uncertainty and allow for swifter decision making by public officials to foster a more business-friendly environment.
  - Urgently strengthen the Anti-Money Laundering / Countering the Financing of Terrorism framework.
  - Improve economic data and combine with greater transparency to enhance policy decision making and support economic and capital market development.

### Concluding statement from the mission
- The IMF team expressed gratitude to the authorities and stakeholders for candid and insightful discussions.
- End-of-mission note: views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board; staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

*IMF Staff Completes 2024 Article IV Mission to Vietnam — June 26, 2024*

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## References

- [Vietnam and the IMF](http://www.imf.org/external/country/VNM/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
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- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2024/06/26/pr24239-vietnam-imf-staff-completes-2024-article-iv-mission_