Vietnam Business Forecast Report Q4 2008

Publication Date	August 2008
Publisher	Business Monitor
Product Type	Report
Pages	66
ISBN Number	1745-0764
Product Code	BMI02413

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Summary

Economy Stabilising, But Major Challenges Remain We are now seeing our anticipation of a stabilisation of economic conditions playing out as Vietnam retreats from the brink of a balance of payments crisis. Government measures to boost exports and curb imports have prompted a dramatic improvement in the trade account in Q 08 while we see inflation peaking at 30% year-on-year (y-o-y) in September before starting to fall gradually over Q 08 and 009. We believe that the lessons learned in 008 will aid the government in better balancing economic policy goals and thus be conducive for increased macroeconomic stability.

We are currently forecasting GDP expansion to slow to 5.5% in 2008 before rising to 7.0% in 2009 and 8.5% in 2010. Looking further ahead, we see Vietnam growing at an average of 8.0% annually over 2013-2017.

We see no great threat to the position of Prime Minister Nguyen Tan Dung and thus envisage a continuation of market reform once Vietnam's current macroeconomic woes have been addressed.

This is because few Vietnamese wish a return to the more directly managed economy of the late 1970s and early 1980s. Support for Dung's market reform agenda is also firm within the ranks of the Communist Party of Vietnam and other key groups in society. Meanwhile, Hanoi has bolstered its international standing through its presence in the UN Security Council, greater participation in the Association of South East Asian Nations and role as a mediator between North Korea and other participants of the 'six-party' talks.

We have revised down our GDP growth forecast for 2008 another notch from 7.0% to 5.5% as domestic demand takes a severe hit from higher prices and monetary tightening. H208 is likely to be characterised by a divergence between the external sector, which will be boosted by government efforts, and a continued strong demand for commodities and a weaker domestic sector. We are still forecasting an economic recovery in 2009, with growth picking up in the second half of the year as monetary conditions are eased and external demand improves. We foresee a new boom in foreign investment as economic conditions stabilise, which will give impetus to growth in 2010 and 2011.

Infrastructure development continues to be a key focus for the government as power shortages threaten to curb growth and stoke inflation. The government is now pressing for the completion of a number of power plants in order to keep up with the estimated 16% annual increase in electricity demand. Increased investment into the power sector is, however, likely to be dependent on breaking state-owned Electricity of Vietnam's monopoly on power distribution. Progress has also been made on port construction, which is crucial for Vietnam's continued industrial expansion. On the legislative front, the likely adoption of a bill lowering the top corporate tax level from 28% to 25% as of January 009 will improve business conditions and bolster investment.

Content

Executive Summary
- Economy Stabilising, but Major Challenges Remain
Chapter 1: Political Outlook
- SWOT Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Governments Reform Resolve Intact
- We Do Not View The Current Economic Slowdown as A Larger Risk to The Standing of Prime Minister Nguyen Tan Dung,
- The Most Important Advocate of Market Reform within The Higher Echelons of The Communist Party of Vietnam.
- Table: Vietnam Political Overview
- Foreign Policy
- Hanois Increasing Assertiveness Carries Risks
- We Foresee Vietnam Continuing to Raise Its Profile on Both The Regional and Global Stage through Closer
- Involvement with The Association of Southeast Asian Nations (Asean) and with The US.
Chapter 2: Economic Outlook
- SWOT Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Slowdown to Sharpen in H208
- We Are Expecting The Vietnamese Economy to Decelerate Further in H208, with Full-Year Gdp Growth Coming in
- at 5.5% as High Inflation and Tighter Lending Conditions Cut into Domestic Demand.
- Table: Vietnam Economic Activity
- Balance of Payments
- Dramatic Improvement in Bop Expected in H208
- The Stabilisation of The Dong Has Been Aided by A Dramatic Improvement in The Balance of Payments, Where
- The Bulging Trade Deficit Has Been Arrested by Government Measures to Curb Imports and Boost The Export Sector.
- Table: Vietnam Balance of Payments
- Exchange Rate Policy
- Still Too Soon to Ease Policy
- The Vietnamese Government Will Continue to Cap The Appreciation of The Dong as The Rapid Improvement in The
- Trade Account and Continued Fdi Inflows Put Upward Pressure The Currency.
- Table: Vietnam Exchange Rate Policy
- Sbv to Keep Rates on Hold
- Banking Sector
- Banking Sector to Remain Intact
- We Continue to See Opportunities for Foreign Investors in The Vietnamese Banking Sector in Spite of The Recent
- Macroeconomic Turbulence.
Chapter 3: 10 Year Forecast
- The Vietnamese Economy to 2017
- A Bumpy Road to Stardom
- We Remain Positive about Vietnams Growth Prospects over The next 10 Years, Believing That The Macroeconomic
- Woes of 2008 Will Have Been A Useful Exercise for A Government Still Inexperienced in Managing A Market Economy.
- Table: Vietnam Long-Term Macroeconomic Forecasts
Chapter 4: Special Report
- Mega-Urban Regions
- Table: The Worlds 30 Largest Urban Agglomerations
- Table: The Worlds Richest Cities in 2020 by Gdp
- Table: The Worlds Fastest Growing Urban Areas by Population
Chapter 5: Business Environment
- SWOT Analysis
- Bmi Business Environment Risk Ratings
- Business Environment Outlook
- Table: Bmi Business and Operational Risk Ratings
- Institutions
- Table: Bmi Legal Framework Ratings
- Infrastructure
- Market Orientation
- Table: Asia, Fdi Inflows
- Table: Bmi Trade Ratings
- Table: Top Export Destinations
- Operational Risk
Chapter 6: Key Sectors
- Tourism
- Table: Vietnams Travel Industry Historical Data and Forecasts
- Defence
- Table: Vietnam Defence Sector Historical Data &Forecasts
Chapter 7: Bmi Global Assumptions
- Global Outlook
- Table: Global Assumptions
- United States
- Eurozone
- Japan
- China
- Commodities