Mr. Francois Painchaud, IMF Regional Resident Representative for Vietnam and Lao. (Photo: IMF)
Reporter: In 2019, Vietnam has made certain economic achievements, shown by stable economic growth results in most areas while the country’s foreign position remains strong in the context of changes in the international environment. Could you please share your views on this statement?
Mr. Francois Painchaud: Vietnam should be commended for its truly remarkable economic performance in 2019. With prudent government policies, Vietnam has witnessed another year of robust and inclusive growth and macroeconomic stability amidst rising trade tensions, external uncertainties and a synchronized slowdown of the global economy.
Vietnam’s GDP expanded by around 7 percent in the first 9 months of 2019, the fastest pace in 9 years, and amongst the best performance in the world. Despite continued strong growth, inflation has remained low, below the 4 percent target of the State bank of Vietnam. Foreign exchange reserves have increased significantly. While Vietnam’s export growth was affected by the external environment, it has remained robust, although slower than in past years. FDI has remained healthy. Non-FDI sector’s export growth has outperformed the FDI sector’s, suggesting encouraging signs of diversification. The authorities also continued to build fiscal buffers and strengthened financial stability by reducing credit growth, accelerating NPL resolution and strengthening macro-prudential policies.
Progress has also been made in several areas of strategic reforms such as enhancing the business environment, promoting private sector development, capital market development, further trade and investment integration, and continued financial sector and public finance reforms.
Reporter: Could you please give your assessment about the prospects of Vietnam’s economy in the coming time?
Mr. Francois Painchaud: Vietnam’s economic outlook is positive. We project the GDP growth of 6.8 percent in 2019, slightly decelerating to 6.5 percent in 2020, supported by solid domestic demand and favorable FDI prospects. Inflation is expected to remain stable and low, while foreign exchange reserve and fiscal buffers are expected to continue strengthening.
However, Vietnam’s economic outlook is clouded by large downside risks. Vietnam’s highly open economy is vulnerable to a renewed escalation of trade tensions, growing protectionism, and weaker-than-expected global growth.
Domestically, chilling effects from the anti-corruption campaign, overlapping laws and regulations, and coordination issues within the government could constrain needed public infrastructure investments, threatening to slow the medium-term growth momentum.
On the upside, newly-signed FTAs could spur productivity gains and support reforms and Vietnam could also further benefit from trade diversion and investment relocation.
Reporter: Over the past year, Vietnam and IMF have had many effective cooperative activities, especially in providing policy advice on banking – finance, could you please talk more about this?
Mr. Francois Painchaud: Vietnam and the IMF maintain a close relationship based on effective cooperation and trust. The IMF has helped Vietnam’s reform efforts over the years through our policy advice, technical assistance and capacity building in numerous areas.
Currently the IMF is providing technical assistance on enhancing macro-economic statistics quality and disclosure, modernizing the monetary policy framework, strengthening foreign exchange reserve management, and treasury management reform. The IMF also provides training courses and workshops in Vietnam and abroad to government officials, in order to help build capacity.
These efforts and our joint analytical work with our esteemed Vietnamese colleagues will hopefully help Vietnam develop its Socio-Economic Reform Strategy for 2021−30 and plan for 2021-2015, and ultimately help Vietnam achieve robust, inclusive and sustainable growth in the future.
Reporter: As the new IMF’s Resident Representative in Vietnam, in the near future, what recommendations and support would you want to give to continue accompanying the Vietnamese Government in socio-economic development?
Mr. Francois Painchaud: Vietnam’s remarkable socio-economic performance notwithstanding, further developments is needed to meet the aspirations of the Vietnamese population. This will require tackling important challenges, including residual aspects of economic dualism, population ageing, climate change, while upgrading Vietnam’s growth model to exploit rapid digital innovation.
Vietnam’s current robust growth provides an opportunity for more ambitious reforms to modernize its economy and enhance its flexibility and resilience to shocks.
In particular, Vietnam would benefit from implementing growth-friendly fiscal reforms, by broadening revenue bases, raising the quality of spending and of public financial management, building high-quality infrastructure and protecting social spending; creating additional fiscal space to meet longer-term challenges arising from aging and climate change; modernizing the monetary policy framework, with greater exchange rate flexibility, to serve the ultimate goal of low and stable inflation and help reduce external imbalances and promote a market-based allocation of credit; adopting Basel II requirements and ensuring that banks are appropriately capitalized; developing capital markets, which is important for long-term investment funding; improving the business climate, by streamlining administrative procedures and speeding-up SOE reforms; and strengthening tertiary education and vocational training, to reduce skill mis-matches and create more and better jobs.
Reporter: Thank you very much!