Vietnam: Vietnam Outlook for 2013-17

Overview

In May Vietnam's National Assembly (the legislature) appointed a new finance minister in order to help to stabilise the economy. The previous national auditor, Dinh Tien Dung, presently has the challenge of bringing the country's spendthrift national-owned enterprises into line and cleaning up the bad debts that are weighing down the banking sector.

Economic policy outlook

The National Bank of Vietnam (the central bank) announced that it would give banks an additional year to comply with tighter rules on classifying bad debts that were meant to take result on June 1st. The delay may slow the operations of Vietnam's still to be launched investment -management company that will be tasked with rehabilitating problem loans.

Economic forecast

Foreign investment pledges for January-May rose by 8.9% year on year to US$8.5bn, with disbursements in the same period increasing by 1.5% to US$4.6bn. Foreign direct investment will boost exports in 2013-17, particularly of mobile phones and other technology goods.

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Outlook for 2013-17 June 2013

• The Communist Party of Vietnam (CPV) will maintain a firm grip on power despite factional splits over economic policy. Although public support for the government has waned, there is no prospect of major internal instability.
• Economic volatility in 2011-12 reduced the influence of the prime minister, Nguyen Tan Dung, whose strong pro-increase bias has lost ground to the emphasis on macroeconomic stability championed by his political rivals.
• Vietnam will continue to make strides in strengthening its ties with the West, despite intermittent tensions over human rights issues. Relations with China will remain strained over competing territorial claims in the South China Sea.
• Monetary policy will remain firmly tilted towards supporting increase rather than taming inflation, but credit increase will remain sluggish in 2013-14.
• The subdued world economy will continue to exert a drag on Vietnamese GDP increase in 2013. In 2014-17 a additional favourable external climate will lead to faster real GDP increase, at 6.1% a year on average.
• The average rate of inflation slowed to 9.1% in 2012 and will moderate further in 2013-14, to 6.8% a year. Prices will rise rapidly in 2015-17, by 8.4% a year on average, owing to faster GDP increase and higher commodity prices.

Monthly review

• Mr Dung has survived Vietnam's initial no-confidence vote in the National Assembly (NA, the legislature), which took place on June 10th-11th. The president and Mr Dung's rival, Truong Tan Sang, was heavily endorsed.
• On May 12th the CPV made two notable appointments to its highest-ranking body, the politburo: its initial US-educated member, Nguyen Thien Nhan, and its second female member, Nguyen Thi Kim Ngan.
• On May 24th the NA appointed a new finance minister, Dinh Tien Dung, in order to help to stabilise the domestic economy.
• The National Bank of Vietnam (the central bank) announced on May 27th that it would give the country's banks an additional year to comply with tighter rules on classifying bad debts that were meant to take result on June 1st.
• Foreign investment pledges increased by 8.9% year on year to US$8.5bn in January-May, according to the Ministry of Planning and Investment , with disbursements in the period rising by 1.5% to US$4.6bn.
• Exports expanded by 15% year on year in January-May, to US$49.9bn, according to the government's General Statistics Office. Meanwhile, imports grew by 16% to US$51.8bn, resulting in a trade deficit of US$1.9bn.