Country Report Vietnam June 2009

Outlook for 2009-10

• The political landscape is unlikely to change dramatically in 2009-10, with the ruling Communist Party of Vietnam almost guaranteed to maintain its firm grip on power.
• The government's fiscal stimulus, estimated to be worth under US$4bn by the IMF, will be directed at a raft of infrastructure projects as well as other measures that will help to boost growth.
• In addition to fiscal loosening, the State Bank of Vietnam (the central bank) will maintain an accommodative monetary policy stance in order to support the economy.
• The Economist Intelligence Unit forecasts that the economy will grow by 2.1% this year, before the rate of growth increases in 2010, to 4.9%.
• As domestic demand growth weakens, we expect price rises to abate and inflation to slow to an average of 6% in 2009. It will stay relatively low in 2010 as external supply-side pressures remain weak.
• The value of the dong against the US dollar will fall by around 8% in nominal terms in 2009, and will decline further, although at a slower pace, in 2010.
• The current-account deficit will narrow in 2009-10 as a result of a reduction in the merchandise trade deficit.

Monthly review

• The controversy surrounding a number of proposed large bauxite mines rumbled on in May. Major concerns have arisen over the inv0lvement of Chinese firms in the projects.
• A number of delegates in the National Assembly (the legislature) have called for greater clarity on the scope of the government's fiscal stimulus package and improved targeting of its intended beneficiaries.
• The Ministry of Planning and Investment is believed to be seeking government approval to open up several service sectors to foreign investors.
• Stockmarket investors appear to be pricing in an economic recovery, with the VN index (an index of all stocks on the Ho Chi Minh Stock Exchange) rising from a low of just 235.5 on February 24th to 458.2 on June 4th.
• Industrial output in the first five months of 2009 grew by 3.9% year on year, a markedly slower rate than the 14-15% annual growth in industrial production that Vietnam has become used to in recent years.
• The trade deficit for the first five months of 2009 totalled US$1.2bn. This is in spite of the massive 37% fall in the value of imports, which totalled just US$23.9bn in the period.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;82
NAICS Code: 52;61

• Highlights
• Outlook for 2009-10: Domestic politics
• Outlook for 2009-10: International relations
• Outlook for 2009-10: Policy trends
• Outlook for 2009-10: Fiscal policy
• Outlook for 2009-10: Monetary policy
• Outlook for 2009-10: International assumptions
• Outlook for 2009-10: Economic growth
• Outlook for 2009-10: Inflation
• Outlook for 2009-10: Exchange rates
• Outlook for 2009-10: External sector
• Outlook for 2009-10: Forecast summary
• The political scene: Proposed bauxite mines stir up controversy
• The political scene: Graduates may struggle to obtain employment
• The political scene: The National Assembly may revise the Investment Law
• Economic policy: The National Assembly will review the budget
• Economic policy: The government may accelerate crucial reforms
• Economic performance: Firms are struggling through the downturn
• Economic performance: Trade and investment flows fall dramatically
• Economic performance: Education is a major concern for business
• 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