The document discusses the macroeconomic environment and monetary policies in Vietnam. It notes that the economy has strongly recovered since 2012, inflation is well anchored, interest rates have stabilized and are expected to decrease, sovereign risks have sharply decreased, the exchange rate has been stable, and foreign direct investment inflows have increased. However, risks remain from potential trade protectionism and reversals in capital flows as other countries tighten monetary policy. Monetary policy aims to keep credit growth consistent with nominal GDP growth while diversifying the banking sector away from corporate lending toward retail banking and fee-based services.

1. MAJOR MACROECONOMIC AND
MONETARY POLICIES ONGOING
Nguyễn Tú Anh

2. ECONOMY STRONGLY RECOVERED
2
R² = 0.8875
5.00
5.50
6.00
6.50
7.00
7.50
2012 2013 2014 2015 2016 2017 2018
GDP Growth

3. MARGINAL PRODUCTIVITY OF CREDIT: MPC
3
0
2
4
6
8
10
12
14
1
1
t t
t t
Credit Credit
MPC
GDP GDP






4. INFLATION IS WELL ANCHORED
Source: GSO
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
1.2012
4.2012
7.2012
10.2012
1.2013
4.2013
7.2013
10.2013
1.2014
4.2014
7.2014
10.2014
1.2015
4.2015
7.2015
10.2015
1.2016
4.2016
7.2016
10.2016
1.2017
4.2017
7.2017
10.2017
1.2018
Headlines Core

5. INFLATION IN ASEAN-5 AND CHINA (Y.O.Y)
5
-5
0
5
10
15
20
25
30
T1
T5
T9
T1
T5
T9
T1
T5
T9
T1
T5
T9
T1
T5
T9
T1
T5
T9
T1
T5
T9
T1
T5
T9
T1
T5
T9
T1
T5
T9
T1
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Việt Nam Trung Quốc Thái Lan Indonesia Philippines Malaysia

6. INTEREST RATES STABILIZED AND DOWNTREND EXPECTEDLY
Nguồn: NHNN
6
0
5
10
15
20
25
Interest rates
Lending rates (average)
Deposit rates (average)

7. SOVEREIGN RISKS SHARPLY DECREASED: CDS 5
YEARS
7
Nguồn: Reuters
100
150
200
250
300
350
400
450
500
550
1/3/2011 1/3/2012 1/3/2013 1/3/2014 1/3/2015 1/3/2016 1/3/2017 1/3/2018

8. EXCHANGE RATE STABLE
8

9. CURB DOWN SPECULATION IN GOLD
9

10. Nguồn: NHNN
Surplus on both current account and capital account,
Trade balance shift to surplus period 10
(4.00)
(2.00)
-
2.00
4.00
6.00
8.00
10.00
2011 2012 2013 2014 2015 2016 2017
Balance of Payment, % GDP
Overall Balance Current Account Balance Capital Account Balance

11. YIELD CURB FLATTERED AND DOWNWARD
11
5.58
6.14
6.36
6.66
7.56
7.74 7.81
3.05
3.40
4.00
4.40
5.10
5.39
3
4
5
6
7
8
9
2N 3N 5N 7N 10N 15N 20N 30N
2016 2017 28/02/2017
• Government can borrow at low costs for long term!
• Low yields may not last long  risks for banks.

12. INCREASING FDI INFLOW
12
7
9
11
13
15
17
19
21
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Implemented FDI (Bil $)

13. MACROECONOMIC ENVIRONMENT: TAIL WIND
 Firm recovery of economy since 2012 which powered
mainly by non-state and foreign invested sector
 Inflation is well anchored; interest rate is stable
and on the down trend; risks of exchange rates are
minimized;
 Foreign reserves increased sharply to around 13
weeks of import (3/2018); Sovereign risks keep
declining
 SBV Creditability on maintaining inflation and
supervision banking sector is improving
 Productivity of credit improving
 Increasing capital inflows
 Better economic performance around the world 13

14. MACROECONOMIC ENVIRONMENT: HEAD WIND
 Trade protectionism  higher uncertainty
 Risk of reverse capital flows?
 Process of reversing monetary policy has started in US,
EU, China and others
 High performance in stock markets in the world in 2017
may need big correction in 2018
 Dilemma: high demand for investment in
infrastructure > Budget deficit?
 Credit/GDP is already high, and credit growth can
not be too expansive.
 Large capital inflows may ignite bubbles in real
estate and stock market and inflation in non-
tradable sector 14

15. Tightening QE

16. 16
Increasing bond yield in US (10 years)

17. WHY BANKS PERFORM WELL IN STOCK
MARKET IN 2017
17
 They are getting safer
 Favorable macroeconomic environment
 Better management and supervision
 NPL decreasing
 They are more profitable
 Vietnam is bank-based economy and growing fast  high
demand for credit  more opportunity for making profit
 Economic recovery help many NPL get resolved
 Demand for new financial services increasing rapidly
 They are more efficient
 With credit growth constrained, credit has been allocated
more efficiently
 Many expensive lessons in management have been learnt
 They are dynamic: diversifying services

18. CHANGES IN BANKING SECTOR
18
 Corporate lending face constraints
 Most of enterprises in Vietnam are newly established or
small ones  low profile to access to corporate credit
 Tightening process of lending and supervision
 Shift to Retail banking
 High demand from newly established and small and
micro enterprises
 Consumption increases due to positive expectation of
economic performance and wealth effects
 On supply side: IT and big data suppliers such as CIC
and StoxPlus helps banks manage risks by providing
more insightful information on potential clients
 There is more room: The consumer credit in 2017
accounted for less than 17% of total credit.

19. CHANGES IN BANKING SECTOR
19
 Credit growth should be consistent with GDP
growth (nominal)  competition in credit providing
will be higher
 Applying Basel II require more capital and slowing
down credit
 Need expanding fee-based services
 Middle class rapidly expanding
 By 2020 middle and upper class in Vietnam would
reach around 33 mil people (Boston Consultant group)
to 44 mil. (Nielson).  Higher demand for other
financial services and insurance.

20. CHANGES IN BANKING SECTOR
20
• Legal side
• MOF and SBV issued inter-ministry circular 86 in
2014 providing legal base for banks to render life
insurance service for insurance firms.
• SBV now drafting circular to guide banks providing
bancassurance services.
• Opportunity for bancassurance is expanding

21. ONGOING MONETARY POLICY
 Prudential monetary policy
 Pro-active sterilization in context of large capital inflow
 Keep close eyes on credit growth, especially on real
estate sector and stock market
 A big correction in stock market may cause bad shock to the
economy as the memory of 2008 has not faded out
 Prioritized target: keep inflation under 4%
 Flexible exchange rate to buffer external shock, if any
 Encouraging banks to diversify services to lessen
proportion of credit-based income
 Closely cooperated with MOF in conducting fiscal policy
and managing G-bond market
21

22. THANK YOU!
22