taking stock an update on vietnams recent economic developments

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  • 1

    World Bank Vietnam

    h2p://www.worldbank.org/vn/takingstock

  • 2

    World Bank Vietnam

    MACRO STABILITY REMAINS A KEY CONCERN FOR MOST VIETNAMESE CITIZENS

    (% of ci*zens who viewed the below issue as a serious problem)

    15

    21

    22

    24

    31

    34

    34

    34

    40

    44

    0 5 10 15 20 25 30 35 40 45 50

    Jobs/Employments

    Income

    Quality of educa*on

    Quality of healthcare

    Environment pollu*on

    Corrup*on

    Social evil

    Food safety

    Trac accident

    Cost of living

    Macroeconomic stability Versus Growth

    Source: Corrup+on from the Perspec+ve of Ci+zens, Firms and Public Enterprises, GI and World Bank (2012)

  • 3

    World Bank Vietnam

    RELATIVELY STABLE MACROECONOMIC SITUATION

    7

    2.1

    11

    0

    10

    20

    30

    40

    O-09 F-10 J-10 O-10 F-11 J-11 O-11 F-12 J-12 O-12

    Headline, food and core inaQon rate (yoy, %)

    Headline Food Core

    16,000

    17,000

    18,000

    19,000

    20,000

    21,000

    22,000

    23,000

    Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12

    Parallel market (mid) Ocial rate (SBV) Ocial upper band

    Exchange rate (VND: USD)

    0

    100

    200

    300

    400

    500

    600

    700

    800

    J-09 M-09 S-09 J-10 M-10 S-10 J-11 M-11 S-11 J-12 M-12 S-12

    Sovereign spreads

    CDS, 5 years

    Pricing of risks

    1.9 1.8 2.1 2.0

    1.7 2.0

    2.3 2.5

    0

    1

    2

    3

    q4-10 q1-11 q2-11 q3-11 q4-11 q1-12 q2-12 q3-12

    InternaQonal reserves (in months of imports)

  • UNDERPINNED BY A STEADY TURNAROUND IN THE EXTERNAL ACCOUNTS

    4

    World Bank Vietnam

    (% of GDP)

    1.1 0.3

    9.8

    11.9

    6.6

    4.1

    -0.2

    -2.7

    4.6 4.6

    14.6 14.2

    8.9

    5.0

    0.4

    -4.7

    -8

    -4

    0

    4

    8

    12

    16

    2005 2006 2007 2008 2009 2010 2011e 2012f

    Current account deficit Trade deficit (BOP definition)

    Decit

    Surplus

  • 5

    World Bank Vietnam

    GROWTH SLOWDOWN: CYCLICAL VS. STRUCTURAL?

    Real GDP Growth Rate (%): Cyclical Upturn and Structural Downturn

    6.9

    6.9 7.5 7.9

    7.1

    7.2 7.8 8.8

    7.3 7.8 9.1

    9.1

    7.1 7.5 8.7

    9.2

    7.8 8.0 8.6 9.2

    7.5

    5.7 6.0

    5.9

    3.1 4

    .5 6.0 6.9

    5.8 6.4 7.2 7.3

    5.6

    5.7 6.1

    6.1

    4.0 4.7 5.4 6.5

    7.3 7.8

    8.5 8.2 8.5

    6.3

    5.3

    6.8

    5.9 5.2

    0

    2

    4

    6

    8

    10

    q1-03

    q2-03

    q3-03

    q4-03

    q1-04

    q2-04

    q3-04

    q4-04

    q1-05

    q2-05

    q3-05

    q4-05

    q1-06

    q2-06

    q3-06

    q4-06

    q1-07

    q2-07

    q3-07

    q4-07

    q1-08

    q2-08

    q3-08

    q4-08

    q1-09

    q2-09

    q3-09

    q4-09

    q1-10

    q2-10

    q3-10

    q4-10

    q1-11

    q2-11

    q3-11

    q4-11

    q1-12

    q2-12

    q3-12

    q4-12(P)

    Growth rate (Quarter-on-Quarter )

    Growth rate (Year-on-Year)

  • 6

    World Bank Vietnam

    GROWTH OUTLOOK 2010 2011e 2012p 2013f

    Real GDP (% change y-y) 6.8 5.9 5.1 5.5 Consumer price index (% change, period avg.) 9.2 18.6 9.2 8.0 Government revenues (% GDP) 29.6 27.7 26.1 25.4 Government expenditures (% GDP) 32.7 30.9 31.3 29.2 Fiscal balance, ocial (% GDP) -0.7 -1.5 -3.7 -2.3 Fiscal balance, general (% GDP) -3.1 -3.2 -5.2 -3.8 Public sector debt (% GDP) 54.0 55.4 53.7 53.3 Trade balance (billions US$) -5.1 -0.5 6.4 5.8 Current account balance (billions US$) -4.3 0.2 3.7 1.9 Foreign direct investment (billions US$) 7.1 7.1 7.2 7.3 External debt (billions US$) 45.4 50.1 54.7 59.8 Interna*onal reserves, gross (months of imports) 1.8 1.5 2.3 .. Domes*c credit (% change y-y) 32.4 14.3 6.0 12.0 Memo: Nominal GDP (billions US$) 103.6 122.7 135.9 150.0 See the report for detail deni*on and es*mates.

  • 7

    World Bank Vietnam

    RISKS TO VIETNAM ECONOMY

    ! Core ina*on is s*ll very high ! Low level of foreign exchange reserves by interna*onal norms ! Premature loosening of scal and/or monetary policy promp*ng resurgence of ina*on ! Worsening of asset quality in credit ins*tu*ons; public debt could rise sharply if con*ngent liabili*es in banking sector and SOEs are realized ! Delayed and inadequate implementa*on of structural reforms including the resolu*on of bad debts in the banks and SOEs are dragging down the countrys long-term growth poten*al

  • 8

    World Bank Vietnam

    UNDERSTANDING THE INFLATION DYNAMICS Administra*ve controls may lead to price stability in the short-run,

    but higher and vola*le ina*on in the medium-term (% change in CPI, year-on-year)

    0

    5

    10

    15

    20

    25

    30

    35

    40

    Jan-10

    Apr-10

    Jul-1

    0

    Oct-10

    Jan-11

    Apr-11

    Jul-1

    1

    Oct-11

    Jan-12

    Apr-12

    Jul-1

    2

    Oct-12

    Sectors where prices are largely determined by market forces

    Beverage and tobacco

    Clothing, hats, footwear

    Household goods and appliances

    Cultural and recrea*on

    0

    5

    10

    15

    20

    25

    30

    35

    40

    Jan-10

    Apr-10

    Jul-1

    0

    Oct-10

    Jan-11

    Apr-11

    Jul-1

    1

    Oct-11

    Jan-12

    Apr-12

    Jul-1

    2

    Oct-12

    Sectors where there are sQll considerable administraQve price controls

    Housing and construc*on materials

    Transport

    Educa*on

    Medical and health care ar*cles

  • 9

    World Bank Vietnam

    LOW LEVEL OF FOREIGN EXCHANGE RESERVES

    Vietnams Level of Interna*onal Reserves from A Regional Perspec*ve

    22.4

    16.7

    13.0

    8.7 8.5 8.0 7.3 7.2 7.1

    2.3

    0

    5

    10

    15

    20

    25

    China Taiwan Philippines Thailand Malaysia Singapore Hong Kong Indonesia Korea Vietnam

    InternaQonal Reserves (in months of imports)

  • 21% 22%

    28%

    42%

    32%

    25%

    54%

    25%

    40%

    32%

    14%

    7%

    26%

    18%

    25%

    29% 30% 34%

    46%

    20%

    29%

    33%

    12% 11%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E

    Credit Total Liquidity

    10

    World Bank Vietnam

    RISK OF PREMATURE LOOSENING OF POLICY

    (% annual change)

  • 11

    World Bank Vietnam

    RESTRUCTURING OF THE FINANCIAL SECTOR

    ! More clarity on the size of the non-performing loans ! Exact mechanism to resolve bad debts; If a public asset management

    company is to be created, issues for considera*on include: o Sources of funding, o Asset transfer pricing principles, o Appropriate accountability and liability of borrowers and so on.

    ! New guidelines with stricter loan classica*on and provisioning requirements

    ! Consolida*on of the banking sector including allowing greater ownership for foreign banks

    ! More investment on developing risk management systems, and ! Strengthening regulatory and supervisory framework.

  • 12

    World Bank Vietnam

    RESTRUCTURING OF THE SOES

    ! Prime Minister Decision 929 and Decision 704 have set a number of important deadlines: o Preparing restructuring plan for all State Economic Groups and General

    Corpora*ons, o Ini*a*ng divestment of non-core business, o Pukng in place a framework to monitor opera*onal and nancial performance

    of SOEs, o Law on state (equity) capital investment, o Improved corporate governance and greater disclosure of informa*on to the

    Na*onal Assembly and the public at large o Strengthening regulatory and supervisory framework.

    ! No silver bullet: there is need for simultaneous and visible progress on all fronts.

  • 13

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