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| Vietnam's economy continues to be affected by declining foreign demand from the end of 2022. Illustration photo. (Source: Shutterstock) |
Accordingly, Vietnam's economy continues to be affected by declining foreign demand from the end of 2022, with exports falling by 12% in the first half of 2023. Liquidity, foreign exchange and inflation pressures ease, but growth decelerates significantly and is expected to slow to 4.7% in 2023.
Inflation is likely to remain under control and Vietnam could return to high growth in the medium term, supported by structural reforms.
Given the ample fiscal space and limited room for monetary policy easing, fiscal policy should play a key role in supporting economic activity if needed. In this context, the authorities’ plans should be implemented to boost public investment disbursements and emphasize the importance of expanding social safety nets to support the most vulnerable.
The IMF recommends strengthening the fiscal framework and budgeting process, and increasing revenue collection over the medium term to support the ambitious socio-economic development plan. The authorities have effectively controlled inflation risks, but monetary policy should remain cautious amid complex circumstances and limited policy space.
The IMF stressed the importance of strengthening the resilience of the financial system, gradually removing regulations that allow debt rescheduling while maintaining the debt group, and dealing with rising bad debt.
Vietnam is focusing on structural and climate reforms to achieve green, inclusive and sustainable growth. Accelerating its transition to a middle-income country will require further efforts to improve the business environment, improve critical infrastructure and invest in human capital.
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