Country Report Vietnam December 2008

Outlook for 2009-10

• The ruling Communist Party of Vietnam will keep a tight grip on power in 2009-10, rejecting calls from some quarters (especially groups of overseas Vietnamese) for political pluralism.
• In 2009-10 the fiscal accounts will be hit by lower revenue growth, while expenditure will remain high. As a result, the budget deficit (excluding on-lending) will widen significantly, to reach 6.7% of GDP in 2009.
• As it attempts to avert a major slowdown in the domestic economy, the State Bank of Vietnam (SBV, the central bank) will continue to cut its policy interest rate in 2009. The rate will average 6.3% in 2009 and 4% in 2010.
• The Economist Intelligence Unit expects real GDP growth in Vietnam to slow to 3.2% in 2009 as export growth contracts, but it will begin to pick up in 2010, to reach 4.1% in that year.
• Disbursements of foreign direct investment will be severely curtailed by the lack of available financing, which will cause investment growth to slow sharply in 2009-10.
• Global food and fuel prices will fall in the forecast period, and domestic demand is expected to weaken. As a consequence, inflation is expected to slow to 6.3% in 2009 and to remain in single digits in 2010.
• We forecast that the current-account deficit will narrow dramatically in the forecast period, to 7% of GDP in 2009 and 5% in 2010, from an estimated 13.7% in 2008, as a result of a large reduction in the trade deficit.

Monthly review

• Foreign aid donors remain unimpressed by Vietnams efforts to fight corruption.
• The National Assembly (the legislature) has postponed action on the proposal to elect the commune-level Peoples Committee chairmen directly.
• The SBV has cut interest rates by 200 basis points since November 21st, bringing the base rate to 10%.
• The monthly value of industrial production peaked in June, at D56.8trn (US$3.6m). It has contracted in month-on-month terms since then, falling to D55.3trn in November.
• Exports (in value terms) in November 2008 were up by just 6.7% year on year, while imports fell by 7.8% in that month.
• Consumer prices declined by 0.74% month on month in November, the largest such fall since the post-Tet (Vietnamese New Year) deflation of March2002.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;70;60;10;48
NAICS Code: 22;72;52;212;517