Reporter: As the head of an international financial organization in Vietnam, would you give a general assessment of Vietnam’s economy in 2018 and prospects in 2019?
Mr. Jonathan Dunn: Vietnam’s economy performed very well in 2018, with real growth of 7.1 percent, the highest in many years. This was also one of the strongest growth performances globally and reflected continued strong growth in industry, agriculture, and trade, as well as strong consumer demand.
During 2018, monetary and fiscal policies were again supportive of growth, and the government’s close attention to macroeconomic stability ensured that inflation remained low. The State Bank of Vietnam again took the opportunity of strong inflows during much of 2018 to raise international reserves to yet another record level. For 2019, Vietnam’s growth momentum is likely to be sustained given continued strong investment inflows and strong fundamentals that make the country an attractive investment destination, though Vietnam’s growth is likely to soften some in view projected slower growth in major trading partners.
Mr. Jonathan Dunn, Resident Representative of the IMF in Vietnam. (Photo: CPV)Reporter: As forecasted, in 2019 the world economy will continue to have many momentous changes. What special advice and support would you give to Vietnam in the goal of economic development, especially implementing solutions to accelerate economic restructuring in the period of 2018-2020?
Mr. Jonathan Dunn: The global economy faces increasing uncertainty as the Year of the Pig approaches. In this environment, the IMF stresses that Vietnam should continue to build its financial buffers so that it has more policy space to respond to the less favorable global environment, and so that investors and others continue to see strength building in the economy and its institutions, including through a more level playing field for the domestic private sector. At the level of macroeconomic policy, this means continued fiscal consolidation to reduce fiscal deficits and put public debt on a long-term sustainable path, further building international reserve buffers, and shifting steadily to market-based monetary policy instruments to make credit allocation in the economy more efficient.
To transform further the financial sector and make it a stronger foundation for economic growth, both bank and capital market reforms are needed. All banks—including state-owned banks—mustensure that they meet their minimum capital requirements and further improve risk management practicesto contain the emergence of possible new non-performing loans. Banks also must prepare themselves to meet the broader Basel II requirements that will come into force starting next year in Vietnam.Deeper and stronger capital markets, which would provide another financial buffer to the economy, will depend on more rapid development and implementation of the legal and institutional architecture to support more active markets for government and corporate bonds, which in turn depend on pension and insurance market development.
For SOEs, the establishment of the State Capital Management Committee is a welcome step in clarifying the role of the state in the ownership and regulation of many large SOEs. The government should also continue its policy to divest shares in large SOEs to restructure the economy and shift ownership to the private sector, in line with the government’s focus on private-sector-led growth.
Reporter: What opportunities and challenges will the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) bring to Vietnam in 2019 when it comes into effect?
Mr. Jonathan Dunn: The CPTPP is now in force and offers Viet Nam major opportunities to expand its exports of many goods into significant markets. The agreement also carries with it incentives for Viet Nam’s firms and government to become more competitive and open in many areas of economic management. At the same time, firms in Viet Nam in some sectors (e.g. agriculture) now face greater competition from similar and more efficient firms in CPTPP partner countries. While greater competition may prove to be a challenge, it is also an opportunity for domestically-owned firms in Viet Nam to respond through better management, logistics, and other practices to drive a needed increase in their productivity. Finally, Viet Nam’s participation in the CPTPP and other free trade agreements signals the country’s strong commitment to an open, fair and rules-based international trading system.
Reporter: As the IMF Resident Representative in Viet Nam, would you please share what specific contributions you will pursue as a bridge to promote Vietnam – IMF relations in the upcoming year?
Mr. Jonathan Dunn: The IMF was very pleased to support Vietnam during 2018 through our regular policy dialog with the government and extensive technical assistance in many areas, including modernization of the monetary policy framework, public investment management, and human capacity building. For 2019, we look forward to a continued close dialog with the government on economic policies, particularly in view of the less certain global environment, and to cooperation with many government agencies to strengthen frameworks for monetary and fiscal policies, public financial management, and economic statistics.
Reporter: Thank you so much!