IMF: VIETNAM'S GROWTH IS EXPECTED TO REACH 4.7% IN 2023

According to the 2023 Article IV consultation conclusion for Vietnam of the Board of Executive Directors of the International Monetary Fund (IMF) announced by the IMF Office in Vietnam on September 28, Vietnam's growth is forecast will be at 4.7% in 2023 before increasing to 5.8% in 2024.

Inflation is expected to remain controlled below the target level of 4.5%

The executive directors agreed with the main content of the assessment in early July 2023 of the IMF expert team at the end of Article IV consultations for Vietnam. Accordingly, Vietnam's economic recovery has stalled due to strong headwinds affecting the economy at the end of 2022 and in the first half of 2023. The economy continues to be affected by decreased demand from abroad.

IMF managing directors applauded Vietnam's authorities for acting quickly to maintain macro-financial stability as the post-pandemic economic recovery faces adverse winds. domestically and internationally.

Liquidity, foreign exchange and inflation pressures have eased, but growth decelerated significantly and is expected to slow down to 4.7% in 2023 thanks to rising exports and loosening policies (especially fiscal policy). Inflation is expected to still be controlled below the target level of 4.5%, maintained at 4.2% for the whole year 2023.

According to the IMF, Vietnam can return to high growth in the medium term, with the support of structural reforms. Growth in 2024 is forecast to be at 5.8% and core inflation at 3.4%.

At the same time, note that risks are still increasing and further efforts are needed to protect macro-financial stability and promote deep reforms to address vulnerabilities and ensure green growth strong and inclusive in the medium term. Continued capacity building is critical to support reforms.

Executives noted that, with plenty of fiscal space remaining, while room to ease monetary policy is limited, fiscal policy needs to play a key role in supporting economic activity. if necessary.

In this context, executives welcomed the authorities' plans to promote the implementation of public investments, which require removing bottlenecks, and emphasized the importance of expanding social safety net to support the most vulnerable. At the same time, it is recommended to strengthen the fiscal framework and budgeting process and increase budget revenue mobilization in the medium term to support ambitious socio-economic development plans.

Monetary policy should continue to be cautious

At the conclusion of this 2023 Article IV consultation for Vietnam, the IMF's managing directors applauded the authorities for effectively controlling inflation risks but emphasized that monetary policy needs to continue. proceed cautiously in a complex context and limited policy space. They welcomed steps towards greater exchange rate flexibility and encouraged continued progress in this area along with the modernization of the monetary policy framework.

Executives emphasized the importance of strengthening the resilience of the financial system by strengthening capital buffers, phasing out regulations that allow debt rescheduling while keeping debt groups intact, and Bad debt is increasing.

They also emphasized the need to improve the authorities' toolkit to prevent and manage banking crises through strengthening bank resolution frameworks and emergency liquidity provision and welcomed the correction. Changes to the Law on Credit Institutions are taking place. Continued efforts to strengthen legal regulations and banking supervision are needed.

The IMF's managing directors acknowledged Vietnam's authorities for acting quickly to contain risks in the real estate and corporate bond markets. They recommended decisive action to address other risks such as strengthening the insolvency resolution framework, strengthening institutions and increasing transparency in the corporate bond market.

The IMF also emphasized the importance of structural and climate reforms to achieve green, inclusive and sustainable growth. Accelerating the transition to middle-income status will require further efforts to improve the business environment, improve key infrastructure and invest in human capital.

In addition, the IMF also welcomed the anti-corruption efforts of the authorities and emphasized the need to continue strengthening governance and improving the Anti-Money Laundering and Terrorist Financing (AML/CFT) as well as simplifying the legal regulatory framework. Further efforts are needed to overcome data weaknesses.

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