AN UPDATE ON VIETNAM'S RECENT ECONOMIC DEVELOPMENT

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AN UPDATE ON VIETNAM'S RECENT ECONOMIC DEVELOPMENT

  1. 1. Outline of the Presentation ACHIEVEMENTS Relatively stable macroeconomic conditions Strong external balance Mixed signals from foreign investors CHALLENGES Longest spell of slow growth since the onset of economic reforms in the late-1980s State’s Finances are Under Stress Slow progress on structural reform and limited results NEAR-TERM OUTLOOK AND RISKS Slow growth phase to persist in the medium-term 2
  2. 2. Relatively Stable Macroeconomic Conditions MODERATE INFLATION INCREASE IN RESERVES STABLE EXCHANGE RATE REDUCED SOVERIGN RISKS 3
  3. 3. Relatively Stable Macroeconomic Conditions Inflation rate (y/y, in %) 25 Exchange rate (VND for 1 US$) 22000 20 15 20000 10 18000 5 Resolution 11 Resolution 11 3 International reserves (in months of imports) 2.7 2.2 2 1.9 2.3 2.8 M-13 M-13 J-13 N-12 S-12 J-12 M-12 M-12 J-12 N-11 S-11 J-11 Cost of borrowing in the international capital markets 700 Sovereign spreads 600 2.3 500 1.8 1.6 M-11 J-11 J-11 A-11 J-11 O-11 J-12 A-12 J-12 O-12 J-13 A-13 J-13 M-11 16000 0 400 1.6 300 200 1 100 Resolution 11 CDS, 5 years Resolution 11 M-13 J-13 S-12 J-12 J-12 S-11 J-11 M-13 Q1-13 N-12 Q3-12 M-12 Q1-12 M-12 Q3-11 N-11 Q1-11 M-11 0 M-11 J-11 0 4
  4. 4. Strong External Accounts INCREASING STRONG GROWTH DIVERSIFICATION RECORD TRADE SURPLUS HIGEST EVER CURRENT ACCOUNT SURPLUS 5
  5. 5. Strong External Accounts Vietnam’s Exports Basket has Changed Considerably in the Past Ten Years 2002 Crude oil 20% Other 26% Electronic s& computer s 3% Footwear 11% 15 5 Garments 16% Trade 15 External Accounts (% of GDP) Crude oil 7% Rice 3% Agriculture 9% Garments 13% Electronics & computers 7% Footwear 7% Balance (in US$ billion): Domestic Vs. Foreign 12.3 10 5.8 12.6 11.1 6.1 0 -6.0 -5 Machinery and parts 4% Tranport vehicles and parts 4% Phones and parts 11% Agricultur e 20% 10 Surplus Plastic products 3% Rice 4% 2012 Other 32% 5.3 0.2 5.9 -10 Current account Overall balance -15 2008 2009 2010 -0.1 -2.7 -4.0 -2.4 -2.7 -1.4 2011 2012e 6.3 4.3 3.6 2.2 -3.6 -3.0 -4.2 -4.3 -6.4 -10 Capital account Deficit 2.5 1.8 1.2 1.3 0.2 0.0 0.6 1.2 6.5 6.1 6.6 4.9 0 -5 -3.8 -11.0 5 3.4 Domestic sector -8.9 -9.4 FDI sector -20 -14.8 -16.1 -17.2 Total -20.2 -24.7 -25 1995 1997 1999 -11.5 -11.6 -15 2001 2003 2005 2007 2009 2011 4m-13 6
  6. 6. Foreign Investors: Worried, But Remain Optimistic About the Future FDI/GDP DECLINING EXISTING & NEW COMPETITORS VIETNAM REMAINS AN ATTRACTIVE DESTINATION 7
  7. 7. Foreign Investors: Worried, But Remain Optimistic About the Future FDI Implemented (in USD Billion) 14 14% 11.5 12 11.0 11.0 10.0 10.5 10 FDI Implemented (% of GDP) 12% 10% 10% 8.0 8 4% 2 10% 6% 4 10% 8% 6 12% 2% 8% 7% 0% 0 2007 2008 2009 2010 2011 2012 Source: 2012/13 ASEAN Business Outlook Survey by AmCham Singapore and US Chamber of Commerce 2007 2008 2009 2010 2011 2012 Source: 2012/13 National Business Survey of the Singapore Business Federation 8
  8. 8. ACHIEVEMENTS Relatively stable macroeconomic conditions Strong external balance Mixed signals from the foreign investors CHALLENGES Longest spell of slow growth since the onset of economic reforms in the late-1980s State’s Finances are Under Stress Slow progress on structural reform and limited results NEAR-TERM OUTLOOK AND RISKS Slow growth phase to persist in the medium-term 9
  9. 9. Longest spell of slow growth since start of Doi Moi SLOW GROWTH RELATIVE TO PAST SLOW GROWTH RELATIVE TO REGIONAL PEERS FALLING INVESTMENT RATE DECLINING RETAIL SALES GROWTH 10
  10. 10. Longest spell of slow growth since start of Doi Moi Real GDP Growth (%) 9.5 annual 3-year moving average 7.8 9 7 11.9 10 6.4 8 50 40 33.3 11.8 16.4 20 13.4 10.0 9.9 8.2 13.3 13.9 6.3 6.1 5.8 5.7 5.4 4.3 4.8 Pre-Crisis Post-Crisis Retail Sales and Services (in %) 36 38.5 10.4 5.2 0 2012 2010 2008 2006 2004 2002 2000 1998 1994 1992 1996 39.2 6.8 2 Investment by ownership (% of GDP) 38.2 5.9 Indonesia Vietnam Thailand 4 Global Economic Crisis 42.7 30 10 4.9 ???? 4.8 Break-up of Soviet Union East Asian Crisis 1990 3 5.4 5.1 China Philippines Malaysia 8.8 12 6 5 Real GDP growth rate (in %) 14 12.8 30.5 29.6 Total Real growth (%) 30 Nominal growth (%) 24 7.1 11.9 7.8 Foreign 10.9 Non-state 18 12 (domestic) 15.9 12.9 15.9 14.7 12.3 11.5 10.9 0 6 0 2007 2008 2009 2010 2011 2012 q1-13 M-08 M-09 M-10 M-11 M-12 M-13 11
  11. 11. State’s Finances are Under Stress HIGH FISCAL DEFICITS DECLINING REVENUE INCREASING DOMESTIC DEBT/GDP RATIO FALLING CAPITAL SPENDING 12
  12. 12. State’s Finances are Under Stress Deficits to GDP ratio (in %) Debt to GDP ratio (in %) 22 18 17 18 16 13 23 20 Domestic Debt 29 23 30 28 10 0 29 0.4 26 1.1 27 1.8 30 2.2 27 2 3.3 29 29 2.5 2.2 3.5 35 40 30 3.0 4.5 Total Debt 52 External 8 4 3.6 47 48 9 4.8 26 Primary deficit 3.6 42 44 43 45 43 50 14 6.1 21 6 52 4 Fiscal deficit 20 60 7.2 19 8 0 -0.4 2001 -2 2003 2005 2007 2009 2011 2006 2007 2008 2009 2010 2011E 2012E 2013B 5 0 Tax 7.8 20.3 7.1 8.5 19.3 19.5 11.6 18.7 14.9 11.8 Capital Recurrent 18.1 10 19.7 15 20.3 Fees, non tax and charges 20 9.1 25 Capital 9.1 24.3 22.8 1.6 1.2 22.1 1.4 1.0 1.1 1.2 30 18.5 2.4 1.9 Grant 9.4 2.2 2.5 27.3 Expenditure to GDP ratio (%) 17.9 25.8 35 9.2 24.4 23.5 10 24.3 20 15 Total 19.8 2.2 2.0 20.5 2.7 2.7 21.1 25 1.8 2.8 22.4 30 Revenue to GDP ratio (%) 29.4 29.3 20.6 29.7 16.9 35 5 0 13
  13. 13. Slow Progress on Structural Reform and Limited Results Banking Sector Restructuring SOE Reforms • Financial sector remains fragile, but risk of a systemic crisis has receded. • Restoration of macroeconomic stability and tight credit policy of SBV have prevented the vulnerabilities from growing bigger. • Establishment of the Vietnam Asset Management Company (VAMC) has so far been the most visible step on the part of the Government to resolve the NPL problems. • Resolution of NPLs will, however, require a proactive multi-pronged approach. • More than two years after the government set out to reform the SOE sector, progress has been limited. • Work is ongoing to build on the existing legislation to create a comprehensive framework for the management of SOEs. • Successful restructuring of SOEs will be difficult to achieve without strong inter-agency coordination and improved transparency. 14
  14. 14. ACHIEVEMENTS Relatively stable macroeconomic conditions Strong external balance Mixed signals from the foreign investors CHALLENGES Longest spell of slow growth since the onset of economic reforms in the late-1980s State’s Finances are Under Stress Slow progress on structural reform and limited results NEAR-TERM OUTLOOK AND RISKS Slow growth phase to persist in the medium-term 15
  15. 15. Slow Progress on Structural Reform and Limited Results Vietnam’s Key Economic Indicators 2010 2011 2012/e 2013/p 2014/p 6.4 6.2 5.2 5.3 5.4 Consumer price index (% change, year-end) 11.7 18.1 6.8 8.2 7.9 Government fiscal balance (% GDP) -2.8 -2.9 -4.8 -4.0 -4.0 Public sector debt (% GDP) 51.7 47.9 51.3 50.4 50.5 Current account balance (% of GDP) -3.8 0.2 5.9 5.6 3.3 Real GDP (% change, y-y %) Near-term Outlook Risks to the Outlook The economy is grow at a moderate rate Change in monetary and fiscal policy of around 5.3 percent during 2013 and 5.4 stance risk stoking inflationary pressures percent in 2014. Delayed implementation of structural Inflation is expected to increase to around reforms could undermine investors’ 8.2 percent at the end of the year. confidence and worsen growth prospects further. 16
  16. 16. Thank You

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