"Vietnam enters 2018 with a lot of momentum, including from the highest-ever commitments of FDI in 2017, which should help drive investment and growth in future years. These good times should be used to pursue reforms to strengthen the foundations for sustainable growth."
This was shared by Mr. Jonathan Dunn, Resident Representative of the International Monetary Fund (IMF) in Vietnam, in responding to an interview by the Communist Party of Vietnam Online Newspaper.
Mr. Jonathan Dunn, Resident Representative of the IMF in Vietnam. (Source: Internet)Reporter: As the head of an international financial institution in Vietnam, would you please share your general assessments on Vietnam’s economic performance in 2017?
Mr. Jonathan Dunn: Vietnam’s economy performed very well in 2017, with real growth estimated at 6.8 percent. This was one of the strongest growth performances globally and reflected Vietnam’s shift into a widening range of manufacturing sectors and the increasing importance of services. During 2017, both monetary and fiscal policies were supportive of growth, and the government’s close attention to macroeconomic stability ensured that inflation remained low. The State Bank of Vietnam also took the opportunity of strong inflows during 2017 to raise international reserves to a record level.
Reporter: Vietnam closed 2017 with significant achievements in GDP growth, exports, state budget collection, investment attraction… Would you please give some recommendations so that Vietnam can maintain and develop its strong performance in 2018 and beyond?
Mr. Jonathan Dunn: Vietnam enters 2018 with a lot of momentum, including from the highest-ever commitments of FDI in 2017, which should help drive investment and growth in future years. These good times should be used to pursue reforms to strengthen the foundations for sustainable growth.
More specifically, sustainable economic growth depends on implementing policies that ensure continued macroeconomic stability and create space for the government to respond to possible economic shocks. For fiscal policy, this means following the government’s objective to reduce public debt by bringing fiscal deficits down to, or below, 3 percent of GDP by 2021, while strengthening revenue collection further and protecting public spending on education, health, and infrastructure. On the monetary policy front, sustainable growth can be supported by moving to a more neutral policy stance with lower credit targets in the short term. In the medium term, Vietnam can gradually modernize its monetary policy framework, introduce even greater exchange rate flexibility to strengthen further the economy’s resilience, and develop deeper domestic capital markets to help finance growth.
With banking sector reforms proceeding well, all banks—including state-owned banks—should focus on meeting their minimum capital requirements and dealing more forcefully with existing NPLs based on Resolution 42 adopted by the National Assembly in 2017. Strengthening bank capital and repairing loan books are important generally, and even more so now because global financial conditions are beginning to tighten.
The SOE restructuring plans for 2016-2020 appropriately focus on improving SOE management and transparency. Restricting SOE investment in non-core areas is also a key measure to improve SOE efficiency to achieve better overall economic outcomes. The sales of shares of large SOEs in 2016 and 2017 are an encouraging sign that significant restructuring of the state-owned sector is underway and that more economic activity is shifting to the private sector, in line with the government’s focus on private-sector-led growth.
Reporter: Vietnam successfully organized APEC 2017 with many positive results in policies and solutions on connecting the business community. Would you please share your assessments on the practical significance of this process in the economic cooperation in the region?
Mr. Jonathan Dunn: APEC 2017 hosted by Vietnam was an outstanding success. The discussions helped build a broad consensus to strengthen the resolve of APEC member economies to continue to pursue regional integration and foster a shared and inclusive future. Specific actions were agreed to strengthen cooperation on international taxation, infrastructure investment, disaster risk financing and insurance, and financial inclusion. In addition, progress was announced on CPTPP on the sidelines of the APEC meetings, which demonstrated Vietnam’s and other APEC countries’ strong commitment to a fair and open trading system.
Reporter: Over the past year, the IMF has been very active in supporting Vietnam’s economy. Would you please advise if IMF will have any specific activities to support Vietnam’s economy in 2018?
Mr. Jonathan Dunn: The IMF was very pleased to support Vietnam during the APEC 2017 year, including through the participation of Managing Director Christine Lagarde in the APEC Leaders’ Retreat in Da Nang at the invitation of President Tran Dai Quang. Our other support included our regular close economic policy dialog with the government and significant capacity building assistance to the State Bank of Vietnam, the Ministry of Finance, and other government agencies. In 2018 and beyond, the IMF will continue to strengthen even further our close partnership to support Vietnam’s reform efforts through policy advice and capacity building.
Reporter: Thank you so much!