Country Report Vietnam January 2010

Outlook for 2010-11

• The ruling Communist Party of Vietnam is due to hold its next national congress in 2011. As a result, there will be considerable jockeying for position within the current leadership from late 2010.
• The budget deficit (excluding on-lending) will remain wide in 2010-11. The government's revenue position will improve in the next two years, but expenditure will remain relatively high.
• The State Bank of Vietnam (SBV, the central bank) is likely to continue to tighten monetary policy in 2010-11 as inflationary pressures build.
• The Economist Intelligence Unit forecasts that the pace of economic growth will increase in 2010-11, but we do not expect it to return to the heady rates that were recorded in the years preceding the 2008-09 slowdown.
• Although the SBV will take steps to rein in credit growth in 2010, inflation will accelerate to an average rate of 8.9% in 2010-11.
• On an annual average basis, we forecast that the dong will depreciate against the US dollar by 6.2% in 2010 and by 1.7% in 2011, although there are significant downside risks to this forecast.
• We expect the current-account deficit to remain wide in 2010-11, standing at an annual average of around 10% of GDP.

Monthly review

• Vietnam's efforts to discourage political criticism have escalated into a sterner form of repression, demonstrating how hardline leaders in the Communist Party are continuing to gain traction ahead of the national congress.
• Although the government has shown that it is not yet prepared to bring to an end all of its stimulus measures, it appreciates that there is a need for a degree of policy tightening.
• In terms of the SBV's continuing support for economic growth, an interest rate subsidy programme has been extended, albeit with the subsidy cut from 4 percentage points to 2 percentage points.
• Vietnam's economy posted another quarter of solid growth in the fourth quarter of 2009. The rate of year-on-year expansion reached 6.9%, the fastest since the first quarter of 2008.
• Based on the consumer price index, year-on-year inflation accelerated to 6.5% in December, from 4.3% in November and 3% in October.
• Despite a general improvement in export revenue in recent months, the merchandise trade account has continued to post a monthly deficit.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1;15;10
NAICS Code: 11;23;212

• Highlights
• Outlook for 2010-11: Domestic politics
• Outlook for 2010-11: International relations
• Outlook for 2010-11: Policy trends
• Outlook for 2010-11: Fiscal policy
• Outlook for 2010-11: Monetary policy
• Outlook for 2010-11: International assumptions
• Outlook for 2010-11: Economic growth
• Outlook for 2010-11: Inflation
• Outlook for 2010-11: Exchange rates
• Outlook for 2010-11: External sector
• Outlook for 2010-11: Forecast summary
• The political scene: The party's crackdown on dissent intensifies
• The political scene: Religious groups come under renewed pressure
• The political scene: Vietnam seeks support to boost its military hardware
• Economic policy: The authorities continue to grapple with policy challenges
• Economic policy: Inflation continues to accelerate
• Economic performance: The pace of economic growth quickens in the fourth quarter
• Economic performance: Inflation continues to accelerate
• Economic performance: Trade deficit remains wide, as the import bill picks up
• Data and charts: Annual data and forecast
• Data and charts: Quarterly data
• Data and charts: Monthly data
• Data and charts: Annual trends charts
• Data and charts: Monthly trends charts
• Data and charts: Comparative economic indicators
• Basic data
• Political structure