- Vietnam’s economy has weathered the recent turbulence in the external environment fairly well, reflecting resilient domestic demand and robust performance of export-oriented manufacturing. Growth further accelerated to 6.5 percent (year-on-year) in the first three quarters of 2015.
- Against the backdrop of low inflation, monetary policy remains accommodative. Average inflation stood at 0.7 percent in the first ten months of 2015, down from 4.6 percent in the same period last year.
- Better macroeconomic conditions helped maintain stability in the banking system, but deep seated vulnerabilities continue to pose risks.
- Fiscal consolidation remains crucial to contain risks to fiscal sustainability
- On the external front, Vietnam’s export performance remains strong, with total export turnover increasing by 9.2 percent from the same period last year.
- Implementing structural reforms continues along a gradual path.
- The medium-term outlook for Vietnam remains positive, and GDP growth is expected to stay at around 6.5 percent in 2015, and 6.6% in 2016.
- While the baseline outlook for Vietnam is positive on balance, downside risks dominate. On the domestic front, slow structural reform poses significant risks to the medium-term growth prospects. Fiscal risks are also substantial, and delays in implementing fiscal consolidation could seriously undermine debt sustainability.
The Trans Pacific Partnership Agreement
- The TPP is expected to generate considerable benefits for Vietnam. On the economic impacts, simulations suggest that the TPP could add as much as 8 percent to Vietnam’s GDP, 17 percent to its real exports, and 12 percent to its capital stock over the next 20 years.
- While the impact of the TPP on Vietnam is expected to be positive, implementation challenges remain.