Taking Stock an Update on Vietnams Recent Economic Developments
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Transcript of Taking Stock an Update on Vietnams Recent Economic Developments
1
World Bank – Vietnam
h2p://www.worldbank.org/vn/takingstock
2
World Bank – Vietnam
MACRO STABILITY REMAINS A KEY CONCERN FOR MOST VIETNAMESE CITIZENS
(% of ci*zens who viewed the below issue as a serious problem)
15
21
22
24
31
34
34
34
40
44
0 5 10 15 20 25 30 35 40 45 50
Jobs/Employments
Income
Quality of educa*on
Quality of healthcare
Environment pollu*on
Corrup*on
Social evil
Food safety
Traffic accident
Cost of living
Macroeconomic stability Versus Growth
Source: Corrup+on from the Perspec+ve of Ci+zens, Firms and Public Enterprises, GI and World Bank (2012)
3
World Bank – Vietnam
RELATIVELY STABLE MACROECONOMIC SITUATION
7
2.1
11
0
10
20
30
40
O-‐09 F-‐10 J-‐10 O-‐10 F-‐11 J-‐11 O-‐11 F-‐12 J-‐12 O-‐12
Headline, food and core inflaQon rate (yoy, %)
Headline Food Core
16,000
17,000
18,000
19,000
20,000
21,000
22,000
23,000
Nov-‐09 May-‐10 Nov-‐10 May-‐11 Nov-‐11 May-‐12 Nov-‐12
Parallel market (mid) Official rate (SBV) Official upper band
Exchange rate (VND: USD)
0
100
200
300
400
500
600
700
800
J-‐09 M-‐09 S-‐09 J-‐10 M-‐10 S-‐10 J-‐11 M-‐11 S-‐11 J-‐12 M-‐12 S-‐12
Sovereign spreads
CDS, 5 years
Pricing of risks
1.9 1.8 2.1 2.0
1.7 2.0
2.3 2.5
0
1
2
3
q4-‐10 q1-‐11 q2-‐11 q3-‐11 q4-‐11 q1-‐12 q2-‐12 q3-‐12
InternaQonal reserves (in months of imports)
UNDERPINNED BY A STEADY TURNAROUND IN THE EXTERNAL ACCOUNTS
4
World Bank – Vietnam
(% of GDP)
1.1 0.3
9.8
11.9
6.6
4.1
-0.2
-2.7
4.6 4.6
14.6 14.2
8.9
5.0
0.4
-4.7
-8
-4
0
4
8
12
16
2005 2006 2007 2008 2009 2010 2011e 2012f
Current account deficit Trade deficit (BOP definition)
Deficit
Surplus
5
World Bank – Vietnam
GROWTH SLOWDOWN: CYCLICAL VS. STRUCTURAL?
Real GDP Growth Rate (%): Cyclical Upturn and Structural Downturn
6.9
6.9 7.5 7.9
7.1
7.2 7.8 8.
8 7.3 7.8 9.
1 9.1
7.1 7.5 8.
7 9.2
7.8 8.0 8.6 9.2
7.5
5.7 6.0
5.9
3.1 4.
5 6.0 6.9
5.8 6.4 7.2 7.3
5.6
5.7 6.1
6.1
4.0 4.7 5.4 6.
5
7.3 7.8
8.5 8.2 8.5
6.3
5.3
6.8
5.9 5.2
0
2
4
6
8
10
q1-‐03
q2-‐03
q3-‐03
q4-‐03
q1-‐04
q2-‐04
q3-‐04
q4-‐04
q1-‐05
q2-‐05
q3-‐05
q4-‐05
q1-‐06
q2-‐06
q3-‐06
q4-‐06
q1-‐07
q2-‐07
q3-‐07
q4-‐07
q1-‐08
q2-‐08
q3-‐08
q4-‐08
q1-‐09
q2-‐09
q3-‐09
q4-‐09
q1-‐10
q2-‐10
q3-‐10
q4-‐10
q1-‐11
q2-‐11
q3-‐11
q4-‐11
q1-‐12
q2-‐12
q3-‐12
q4-‐12(P)
Growth rate (Quarter-‐on-‐Quarter )
Growth rate (Year-‐on-‐Year)
6
World Bank – Vietnam
GROWTH OUTLOOK 2010 2011e 2012p 2013f
Real GDP (% change y-‐y) 6.8 5.9 5.1 5.5 Consumer price index (% change, period avg.) 9.2 18.6 9.2 8.0 Government revenues (% GDP) 29.6 27.7 26.1 25.4 Government expenditures (% GDP) 32.7 30.9 31.3 29.2 Fiscal balance, official (% GDP) -‐0.7 -‐1.5 -‐3.7 -‐2.3 Fiscal balance, general (% GDP) -‐3.1 -‐3.2 -‐5.2 -‐3.8 Public sector debt (% GDP) 54.0 55.4 53.7 53.3 Trade balance (billions US$) -‐5.1 -‐0.5 6.4 5.8 Current account balance (billions US$) -‐4.3 0.2 3.7 1.9 Foreign direct investment (billions US$) 7.1 7.1 7.2 7.3 External debt (billions US$) 45.4 50.1 54.7 59.8 Interna*onal reserves, gross (months of imports) 1.8 1.5 2.3 .. Domes*c credit (% change y-‐y) 32.4 14.3 6.0 12.0 Memo: Nominal GDP (billions US$) 103.6 122.7 135.9 150.0 See the report for detail defini*on and es*mates.
7
World Bank – Vietnam
RISKS TO VIETNAM ECONOMY
! Core infla*on is s*ll very high ! Low level of foreign exchange reserves by interna*onal norms ! Premature loosening of fiscal and/or monetary policy promp*ng resurgence of infla*on ! Worsening of asset quality in credit ins*tu*ons; public debt could rise sharply if con*ngent liabili*es in banking sector and SOEs are realized ! Delayed and inadequate implementa*on of structural reforms including the resolu*on of bad debts in the banks and SOEs are dragging down the country’s long-‐term growth poten*al
8
World Bank – Vietnam
UNDERSTANDING THE INFLATION DYNAMICS Administra*ve controls may lead to price stability in the short-‐run,
but higher and vola*le infla*on in the medium-‐term (% change in CPI, year-‐on-‐year)
0
5
10
15
20
25
30
35
40
Jan-‐10
Apr-‐10
Jul-‐1
0
Oct-‐10
Jan-‐11
Apr-‐11
Jul-‐1
1
Oct-‐11
Jan-‐12
Apr-‐12
Jul-‐1
2
Oct-‐12
Sectors where prices are largely determined by market forces
Beverage and tobacco
Clothing, hats, footwear
Household goods and appliances
Cultural and recrea*on
0
5
10
15
20
25
30
35
40
Jan-‐10
Apr-‐10
Jul-‐1
0
Oct-‐10
Jan-‐11
Apr-‐11
Jul-‐1
1
Oct-‐11
Jan-‐12
Apr-‐12
Jul-‐1
2
Oct-‐12
Sectors where there are sQll considerable administraQve price controls
Housing and construc*on materials
Transport
Educa*on
Medical and health care ar*cles
9
World Bank – Vietnam
LOW LEVEL OF FOREIGN EXCHANGE RESERVES
Vietnam’s Level of Interna*onal Reserves from A Regional Perspec*ve
22.4
16.7
13.0
8.7 8.5 8.0 7.3 7.2 7.1
2.3
0
5
10
15
20
25
China Taiwan Philippines Thailand Malaysia Singapore Hong Kong Indonesia Korea Vietnam
InternaQonal Reserves (in months of imports)
21% 22%
28%
42%
32%
25%
54%
25%
40%
32%
14%
7%
26%
18%
25%
29% 30% 34%
46%
20%
29%
33%
12% 11%
0%
10%
20%
30%
40%
50%
60%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E
Credit Total Liquidity
10
World Bank – Vietnam
RISK OF PREMATURE LOOSENING OF POLICY
(% annual change)
11
World Bank – Vietnam
RESTRUCTURING OF THE FINANCIAL SECTOR
! More clarity on the size of the non-‐performing loans ! Exact mechanism to resolve bad debts; If a public asset management
company is to be created, issues for considera*on include: o Sources of funding, o Asset transfer pricing principles, o Appropriate accountability and liability of borrowers and so on.
! New guidelines with stricter loan classifica*on and provisioning requirements
! Consolida*on of the banking sector including allowing greater ownership for foreign banks
! More investment on developing risk management systems, and ! Strengthening regulatory and supervisory framework.
12
World Bank – Vietnam
RESTRUCTURING OF THE SOES
! Prime Minister Decision 929 and Decision 704 have set a number of important deadlines: o Preparing restructuring plan for all State Economic Groups and General
Corpora*ons, o Ini*a*ng divestment of non-‐core business, o Pukng in place a framework to monitor opera*onal and financial performance
of SOEs, o Law on state (equity) capital investment, o Improved corporate governance and greater disclosure of informa*on to the
Na*onal Assembly and the public at large o Strengthening regulatory and supervisory framework.
! No silver bullet: there is need for simultaneous and visible progress on all fronts.
13