Vietnam’s economy performs well in 2016

Reporter: As the head of an international financial institution in Vietnam, could you please make an assessment on the status of Vietnam's economy in 2016 and prospects for 2017?
Mr. Jonathan Dunn: Vietnam’s economy performed well in 2016, with real growth estimated at 6.2 percent even in the face of domestic shocks to agriculture and relatively weak external demand for some key export markets. This was one of strongest growth performances globally.
The government’s strong efforts also ensured the continuation of macroeconomic stability, with core inflation remaining below 2 percent and overall inflation of below 5 percent, even with significant increases in administered prices for education and health.
Vietnam has entered 2017 with strong fundamentals, and recent indicators—such as the strong purchasing managers index and FDI commitments—should support robust investment and growth going forward.
The government’s strong commitment to further integration with the global economy should also support growth prospects.
Reporter: It is forecast that in 2017 the world economy will continue to change due to effects of the British exit from the European Union (Brexit), the Organization of the Petroleum Exporting Countries (OPEC) adjusting its production and the result of the election of the US president, which is expected to affect the ratification of the Trans-Pacific Partnership Agreement (TPP). Do you expect these changes to impact Vietnam’s economy and if so, what scope will the impact have?
Mr. Jonathan Dunn: Vietnam’s economy is now highly interconnected with the global system, with the sum of exports and imports equivalent to more than 170 percent of Vietnam’s GDP. The IMF’s January 2017 WEO forecast shows global growth rising to 3.4 percent in 2017 from 3.1 percent in 2016.
Importantly for Vietnam, that growth is now projected to be supported more by advanced economies, including with somewhat brighter growth prospects in Europe, Japan and the US.
To the extent that higher growth in advanced economies is driven by domestic demand, this will likely benefit exporters like Vietnam, even with input costs possibly rising due to somewhat higher average oil prices.
The possible loss of the TPP may affect Vietnam’s growth prospects in the future, though this will depend on how Vietnamese firms adapt to the ever changing global environment.
The ability of Vietnam’s economy to adapt to global uncertainty will also depend critically on the maintenance of macroeconomic stability, greater policy flexibility, and the rapid pursuit of deep structural reforms.
Reporter: Could you reveal what, in the coming year, IMF will continue to contribute to boosting relations with Vietnam, as well as what the organization will advise and recommend the government of Vietnam for policies to run the economy?
Mr. Jonathan Dunn: The IMF will continue its close working relations with Vietnam to help support economic reforms and development. We have a very constructive and regular dialogue with the government at all levels in policy areas that are critical to macroeconomic developments.
To complement this policy dialogue, the IMF is providing the Ministry of Finance, the State Bank of Vietnam, and other government organizations with technical assistance and training to help build further the already strong capacity for the management of economic policies in Vietnam and to improve data for policy making.
In terms of specific macroeconomic policies, we continue to recommend that Vietnam pursue a gradual and growth-friendly fiscal consolidation to contain public debt, while protecting critical social and infrastructure spending.
We also advocate for the development of a stronger monetary policy framework and greater exchange rate flexibility to support international reserves, help protect competitiveness, and strengthen the country’s ability to absorb external shocks.
Finally, we support the government’s plans for deeper and broader structural reforms of SOEs, the financial sector and public investment, as this will ensure that savings are allocated to the most productive economic uses and that public and private investment can support the job growth needed to meet the high ambitions of Vietnam’s population. Progress in all three of these areas will help create the policy space Vietnam needs so that it can respond most effectively to various economic shocks and global uncertainty.
Reporter: Thank you very much!