Which way Vietnam?
Once a roaring growth engine in Asia, Vietnam’s GDP has slowed significantly in the past few years. While the external environment is partly to blame, much of it is domestic-born. We think growth will decelerate to 5.0% this year from 5.9% and only expand by a modest 5.3% in 2013. That’s not much to boast about, considering Vietnam’s trend growth has been above 7%.
Once a roaring growth engine in Asia, Vietnam’s GDP has slowed significantly in the past few years. While the external environment is partly to blame, much of it is domestic-born. We think growth will decelerate to 5.0% this year from 5.9% and only expand by a modest 5.3% in 2013. That’s not much to boast about, considering Vietnam’s trend growth has been above 7%.
Who is to blame for this predicament? It seems that many of the top leaders in the Communist Party are apologetic, including the Prime Minister who has personally taken responsibility for “faults and mistakes” for “weak management of the economy” (Bloomberg, 16 and 22
October). This is a step in the right direction, as it signals that the government is aware of the inefficiency of the state-owned enterprises and rising corruption within the country. But no concrete reforms to SOEs have been laid out and there are few signs that they will come soon.
Of most interest to observers of Vietnam is not which politician to blame for slowing growth. Rather it is how the government will: reduce red tape; improve the business environment to support Vietnam’s highly productive and efficient farmers, manufacturers and entrepreneurs as well as keen foreign investors; improve coordination between the local and central government as well as different ministries to effectively implement regulations as well as deliver development goals; foster Vietnam’s processing capability to increase the value of its exports and reduce import costs; and increase agriculture productivity to meet rising demand, to name
a few. In short, taking concrete steps to improve the efficiency of the economy.
National Assembly adopts 2013 budget estimates
November 11, 2012
The National Assembly adopted a resolution on the State budget estimates for 2013 at its working session on November 10.
Accordingly, budget revenues are projected at VND816 trillion (roughly US$38.8 billion) while spending would be VND978 trillion (US$46.5 billion). This would translate into a deficit of VND162 trillion, equivalent to 4.8 percent of GDP.
The resolution requests that the government pursue a tight fiscal policy in combination with suitable monetary policies to curb inflation and maintain a stable macro economy, while seeking ways to fully tap domestic and foreign resources for restoring production, stimulating business and boosting economic growth.
The NA also requires the government to strictly manage spending activities to prevent wastefulness and corruption, and promote thrifty spending. New construction and projects will be limited next year in order to save money to pay for completed projects or those slated to complete within 2013.
The minimum wage will be adjusted up by VND100,000 to VND1.15 million by July 1 next year.
National Assembly adopts 2013 budget estimates
November 11, 2012
The National Assembly adopted a resolution on the State budget estimates for 2013 at its working session on November 10.
Accordingly, budget revenues are projected at VND816 trillion (roughly US$38.8 billion) while spending would be VND978 trillion (US$46.5 billion). This would translate into a deficit of VND162 trillion, equivalent to 4.8 percent of GDP.
The resolution requests that the government pursue a tight fiscal policy in combination with suitable monetary policies to curb inflation and maintain a stable macro economy, while seeking ways to fully tap domestic and foreign resources for restoring production, stimulating business and boosting economic growth.
The NA also requires the government to strictly manage spending activities to prevent wastefulness and corruption, and promote thrifty spending. New construction and projects will be limited next year in order to save money to pay for completed projects or those slated to complete within 2013.
The minimum wage will be adjusted up by VND100,000 to VND1.15 million by July 1 next year.
What this year has shown is not the extent of Vietnam’s troubles but rather the resilience of its people. The latest Doing Business Survey from the World Bank shows that Vietnam has a more competitive business environment than India, the Philippines and Indonesia (but trails
behind Thailand significantly). Year-to-date export growth is in the double digits, supported by new investment in electronics, while import growth narrowed to single digits. Retail sales are thriving thanks to the young population. While Vietnam’s inherent advantages – people and resources – will allow the country to muddle through, a brighter future is only possible with a more efficient state sector that won’t dim Vietnam’s star performers.
2008
|
2009
|
2010
|
2011
|
2012f
|
2013f
|
2014f
|
|
Prod., demand, employment
|
|||||||
GDP growth (% y-o-y)
|
6.3
|
5.3
|
6.8
|
5.9
|
5.0
|
5.3
|
5.6
|
Nominal GDP (USDbn)
|
91.1
|
97.2
|
106.4
|
123.6
|
140.5
|
159.7
|
184.4
|
GDP per capita
(USD)
|
1,052
|
1,064
|
1,156
|
1,392
|
1,565
|
1,761
|
2,013
|
Private consumption
(% y-o-y)
|
9.3
|
3.1
|
10.0
|
4.4
|
4.2
|
5.0
|
5.0
|
Government consumption
(% y-o-y)
|
7.5
|
7.6
|
12.3
|
7.2
|
5.0
|
3.0
|
3.0
|
Investment (% y-o-y)
|
3.8
|
8.7
|
10.9
|
-10.4
|
2.0
|
4.3
|
4.7
|
Industrial production (% y-o-y)
|
14.6
|
7.6
|
14.0
|
na
|
na
|
na
|
na
|
Gross domestic saving (% GDP)
|
29.0
|
31.9
|
35.3
|
32.7
|
33.0
|
29.6
|
30.9
|
Unemployment rate, end-year (%)
|
4.7
|
4.6
|
4.3
|
4.5
|
4.6
|
4.4
|
4.4
|
Prices & wages
|
|||||||
CPI, average (% y-o-y)
|
23.1
|
7.0
|
9.2
|
18.6
|
9.2
|
11
|
9.4
|
CPI, end-year (% y-o-y)
|
19.9
|
6.5
|
11.8
|
18.0
|
8.0
|
10.8
|
9.4
|
Core CPI, average
(% y-o-y)
|
11.0
|
6.9
|
8.5
|
13.4
|
10.2
|
10.3
|
7.0
|
Core CPI, end-year (% y-o-y)
|
10.6
|
7.0
|
10.6
|
13.0
|
10.6
|
7.7
|
6.9
|
PPI, average (% y-o-y)
|
20.0
|
7.7
|
12.1
|
17.8
|
11.6
|
11.2
|
11.3
|
PPI, end-year (% y-o-y)
|
21.8
|
7.3
|
12.6
|
20.1
|
13.0
|
12.0
|
13.0
|
Manufacturing wages, nominal (% y-o-y)
|
20.0
|
15.8
|
16.5
|
19.0
|
12.0
|
11.0
|
14.0
|
Money, FX &
interest rates
|
|||||||
Broad money supply
M2, average (% y-o-y)
|
20.7
|
26.2
|
29.7
|
9.3
|
13.0
|
17.0
|
14.0
|
Real private sector
credit growth (% y-o-y)
|
25.4
|
39.6
|
27.7
|
14.4
|
5.0
|
13.0
|
15.0
|
Policy rate (OMO rate), end-year (%)
|
9.00
|
8.00
|
10.00
|
14.00
|
8.00
|
10.00
|
9.00
|
5yr yield, end-year (%)
|
10.00
|
11.70
|
11.50
|
12.60
|
na
|
na
|
na
|
VND /USD, end-year
|
17,483
|
18,200
|
19,498
|
21,034
|
21,500
|
21,500
|
21,500
|
VND /USD, average
|
16,759
|
18,317
|
19,260
|
20,836
|
21,041
|
21,191
|
21,500
|
VND /EUR, end-year
|
24,301
|
26,084
|
25,872
|
27,287
|
29,025
|
29,455
|
30,100
|
VND /EUR, average
|
24,943
|
25,756
|
25,375
|
28,708
|
27,587
|
27,984
|
30,100
|
External sector
|
|||||||
Merchandise exports
(USDbn)
|
62.7
|
57.1
|
72.2
|
96.9
|
115.0
|
139.2
|
167.7
|
Merchandise imports (USDbn)
|
80.7
|
69.9
|
84.8
|
106.7
|
116.7
|
143.7
|
175.8
|
Trade balance (USDbn)
|
-18.0
|
-12.9
|
-12.6
|
-9.8
|
-1.7
|
-4.5
|
-8.1
|
Current account balance
(USDbn)
|
-10.8
|
-6.1
|
-3.8
|
1.3
|
1.0
|
-4.0
|
-2.0
|
Current account balance
(% GDP)
|
-11.8
|
-6.3
|
-3.6
|
0.1
|
0.7
|
-2.5
|
-1.1
|
Net FDI (USDbn)
|
11.5
|
10.0
|
11.0
|
11.0
|
10.0
|
10.0
|
11.0
|
Net FDI (% GDP)
|
12.6
|
10.3
|
10.3
|
8.9
|
7.1
|
6.3
|
6.0
|
Current account balance
plus FDI (% GDP)
|
0.8
|
4.0
|
6.7
|
9.0
|
7.8
|
3.8
|
4.9
|
Exports, value
(% y-o-y)
|
29.1
|
-8.9
|
26.5
|
34.2
|
18.7
|
21.1
|
20.5
|
Imports, value
(% y-o-y)
|
28.6
|
-13.3
|
21.3
|
25.8
|
9.3
|
23.1
|
22.3
|
International FX reserves (USDbn)
|
24.2
|
16.8
|
12.9
|
12.0
|
16.5
|
18.0
|
20.0
|
Import cover (months)
|
3.6
|
2.9
|
1.8
|
1.3
|
1.7
|
1.5
|
1.4
|
Public and external solvency indicators
|
|||||||
Gross external debt
(USDbn)
|
29.5
|
40.4
|
46.6
|
50.8
|
57.9
|
64.5
|
74.7
|
Gross external debt
(% GDP)
|
32.4
|
41.6
|
43.8
|
41.1
|
41.2
|
40.4
|
40.5
|
Short term external debt (% of int'l reserves)
|
17.7
|
30.9
|
53.8
|
43.2
|
42.1
|
37.2
|
34.5
|
Private sector external debt
(USDbn)
|
6.1
|
10.2
|
11.8
|
13.2
|
15.5
|
17.4
|
20.3
|
Consolidated government
balance (% GDP)
|
-0.5
|
-7.2
|
-5.2
|
-2.7
|
-3.6
|
-2.6
|
-2.3
|
Primary balance (% GDP)
|
0.6
|
-5.9
|
-3.9
|
-1.3
|
-2.1
|
-1.5
|
-1.3
|
Gross public domestic debt (VND trn)
|
15.7
|
19.5
|
22.9
|
22.4
|
25.6
|
27.3
|
29.5
|
Gross public domestic debt (% GDP)
|
17.2
|
20.1
|
21.5
|
18.1
|
18.2
|
17.1
|
16.0
|
Gross public external debt (USDbn)
|
23.4
|
30.2
|
34.8
|
37.6
|
42.4
|
47.1
|
54.4
|
Gross public external debt (% GDP)
|
25.7
|
31.1
|
32.7
|
30.4
|
30.2
|
29.5
|
29.5
|
Gross public sector
debt (% GDP)*
|
42.9
|
51.2
|
54.2
|
48.5
|
48.4
|
46.6
|
45.5
|
Macro-prudential indicator
|
|||||||
Total credit/GDP (%, year-end)
|
90.2
|
112.7
|
118.0
|
108.0
|
na
|
na
|
na
|
Loan/deposit ratio
|
96.7
|
103.9
|
105.4
|
107.5
|
na
|
na
|
na
|
Stock market capitalisation/GDP (%)
|
14.1
|
34.5
|
34.7
|
na
|
na
|
na
|
na
|
