Country Report Vietnam January 2009

Outlook for 2009-10

• The ruling Communist Party of Vietnam will keep a tight grip on power in 2009-10, but the risk of minor social unrest will heighten as economic growth slows and unemployment rises.
• The government's budget deficit will widen in 2009 as it pushes through a large fiscal stimulus package. Relatively slow revenue growth in the face of the economic slowdown will also contribute to this trend.
• As it attempts to avert a major slowdown in the domestic economy, the State Bank of Vietnam (SBV, the central bank) will continue to loosen monetary policy.
• The Economist Intelligence Unit expects real GDP growth in Vietnam to slow to 3% in 2009 as exports contract, but for growth to begin to pick up in 2010, to reach 4% in that year.
• 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 sharply to 5.1% in 2009 and to 3.6% in 2010.
• The current-account deficit will narrow in the forecast period, largely owing to the reduction in the merchandise trade deficit. However, a drop in capital inflows will contribute to a contraction in international reserves.

Monthly review

• The Communist Party has tightened its control over the flow of news in the country via established media, such as print newspapers, and also via the Internet, with particular attention paid to blogs.
• The government's relations with Japan have been troubled by a corruption scandal, but the two sides have also signed an economic partnership pact.
• The government is fretting about the potential sharp slowdown in economic growth and has recently proposed a US$1bn stimulus package, while the SBV cut official interest rates again in late December.
• Real GDP growth stood at 6.2% in 2008, well below the pace of 8.5% recorded in 2007. In the fourth quarter of 2008 year-on-year growth slowed to 5.4%.
• Consumer prices fell by nearly 0.7% month on month in December, the second consecutive month of deflation. Despite this drop in prices, in 2008 annual average inflation stood at around 23%, up sharply from 8.9% in 2007.
• The annual meeting of the Consultative Group of international donors took place in early December, and once again donors were generous, pledging US$5bn in official development assistance.

This report covers the following industry codes:
SIC Code: 60;10;70;15
NAICS Code: 52;212;72;23

This report covers the following industry codes:
SIC Code: 60;10;70;15
NAICS Code: 52;212;72;23