2015年-世界发展银行全球_Taking_Stock_December_2015___An_Update_on_Vietnams_Recent_Economic_Developments_34页_1mb

Summary of Vietnam's Recent Economic Developments and the Trans Pacific Partnership Agreement

Core Content

This report provides an update on Vietnam's recent economic developments in December 2015, with a special focus on the Trans-Pacific Partnership (TPP) Agreement. It outlines the country's macroeconomic performance, structural reforms, and the potential impacts of the TPP on its economy.

Main Points

1. Global Economic Outlook

• Weak global growth persisted in the first half of 2015 due to a slowdown in emerging markets and a weak recovery in advanced economies.
• Advanced economies are expected to grow modestly in 2016, with stronger growth in the Euro area and Japan.
• Developing economies, including Vietnam, face challenges such as weak commodity prices, capital flow tightening, and subdued trade growth.
• The global outlook remains risky, with major concerns including China's transition to slower growth, weak commodity prices, capital flow reversals, and rising external financing costs.

2. Vietnam's Economic Performance

• Vietnam's economy weathered external turbulence well, driven by resilient domestic demand and robust export-oriented manufacturing.
• GDP growth accelerated to 6.5% (year-on-year) in the first three quarters of 2015, up from 6% in 2014.
• Private consumption increased due to low inflation and rising consumer confidence.
• Investment was supported by strong foreign direct investment (FDI), increased government capital expenditures, and a recovery in credit growth.
• Export performance remained strong, with total export turnover up 9.2% year-on-year, though commodity exports slowed and import volumes rose, especially of capital and intermediate goods.

3. Inflation and Monetary Policy

• Inflation remained low, with an average of 0.7% in the first ten months of 2015, down from 4.6% in the same period in 2014.
• Headline inflation was historically low, driven by falling energy and food prices.
• The State Bank of Vietnam (SBV) adopted accommodative monetary policy, cutting policy rates by a cumulative 850 basis points since 2012.
• Credit growth resumed at around 12% (year-to-date) in September 2015, the highest since 2011.

4. Exchange Rate Dynamics

• Exchange rate pressures were eased by a gradual devaluation of the VND.
• The SBV devalued the VND by a cumulative 3% and widened the trading band to ±3%.
• The VND fell by about 5% against the USD in nominal terms and 3% in real terms.
• Despite devaluation, the VND gained relative strength compared to other Asian currencies.
• The SBV lowered USD deposit rates and tightened foreign currency transactions to prevent speculation and maintain stability.

5. Fiscal Consolidation

• Fiscal consolidation remains crucial to ensure fiscal sustainability.
• Fiscal deficit in the first nine months of 2015 was estimated at 4.9% of GDP (excluding off-budget activity).
• Revenue was dampened by declining oil revenue and a further corporate income tax (CIT) rate cut.
• Expenditure grew faster than revenue, mainly due to recurrent spending.
• The public debt burden increased, with the fiscal deficit likely higher when including off-budget capital spending.
• Treasury bond issuance was limited due to regulatory restrictions, and the Ministry of Finance (MOF) borrowed from the SBV to finance deficits.

6. External Sector and Trade

• Current account surpluses narrowed due to a weaker trade balance.
• FDI inflows helped mitigate external financing risks.
• Imports, especially of capital goods, surged, reflecting increased investment and the import-intensive nature of Vietnamese manufacturing.
• Vietnam's trade position weakened in 2015, but remittances helped maintain a current account surplus.

7. Structural Reforms

• Structural reforms are progressing gradually.
• The business environment has improved, with Vietnam moving up in the World Bank's Doing Business rankings from 93rd in 2015 to 90th in 2016.
• Competitiveness remains below the ASEAN-4 average, with slow progress in infrastructure, institutional framework, and business environment.
• Key challenges include tax payment times, minority investor protections, access to electricity, and business insolvency.
• The government issued Resolution 19/NQ-CP/2015 to improve the business climate by reducing tax payment periods and export/import processing times.

8. Trans-Pacific Partnership (TPP) Agreement

• The TPP is expected to bring significant benefits to Vietnam, especially due to its low per capita GDP and comparative advantages in labor-intensive manufacturing.
• The TPP could increase Vietnam's GDP by 8%, real exports by 17%, and capital stock by 12% over the next 20 years.
• Tariff reductions and non-tariff measures (NTMs) are expected to be the main drivers of these benefits, with tariff cuts contributing about half and NTMs the other half.
• Labor-intensive sectors such as textiles, apparel, and footwear are expected to benefit the most, while agriculture and services may decline due to structural transformation.
• The TPP will also impact regulatory quality, intellectual property rights, investor protection, competition, state-owned enterprises (SOEs), labor and environmental standards, and public procurement.
• Implementation challenges remain, including incomplete market institutions, a large SOE sector, and gradual reform path.
• Vietnam has historical experience in leveraging external commitments to drive domestic reforms, as seen in its WTO accession.

9. Risks and Outlook

• The medium-term outlook for Vietnam is positive, with GDP growth expected to remain around 6.5% in 2015 and strengthen further in the medium term.
• Inflation is expected to remain low but may rise in the medium term due to global price changes.
• The trade balance is projected to narrow significantly, driven by moderating exports and sustained import growth.
• External capital inflows are expected to cover balance-of-payment needs and increase FDI.
• Fiscal consolidation is expected to continue and reduce public debt.
• Downside risks include slow structural reforms, delays in fiscal consolidation, and external shocks such as slower export market growth and rising sovereign spreads.

Key Information

• GDP Growth: 6.5% (year-on-year) in 2015, up from 6% in 2014.
• Inflation: Average 0.7% in 2015, down from 4.6% in 2014.
• Exchange Rate: VND fell 5% against USD in 2015, with a cumulative devaluation of 3%.
• Fiscal Deficit: 4.9% of GDP in the first nine months of 2015.
• Credit Growth: 12% (year-to-date) in September 2015, the highest since 2011.
• TPP Impact: Expected to boost GDP by 8%, real exports by 17%, and capital stock by 12% over 20 years.
• Doing Business Rank: Improved from 93rd in 2015 to 90th in 2016.
• Major Sectors: Manufacturing led growth, while agriculture and services saw slower performance.
• Fiscal Consolidation: Needed to avoid breaching the 65% of GDP public debt limit.
• Exchange Rate Flexibility: SBV introduced a ±3% trading band to allow more flexibility.
• Structural Reforms: Ongoing but slow, with focus on SOE equitization, banking sector reforms, and business environment improvements.

Conclusion

Vietnam's economy has shown resilience in the face of external volatility, supported by strong domestic demand and export-oriented manufacturing. The TPP is expected to provide significant economic benefits, particularly through tariff reductions and non-tariff measures, though it may also raise production costs in certain sectors. Despite these opportunities, implementation challenges and slow structural reforms remain critical issues that could impact long-term growth and fiscal sustainability. Sound macroeconomic management, fiscal consolidation, and structural reforms are essential to mitigate risks and enhance competitiveness.