Transcript Vietnam`s Economic Environment: IMF/World Bank - US

VIETNAM’s ECONOMIC
ENVIRONMENT
Vietnam Investment and Trade 2002
April 25, 2002
Dr. Susan J. Adams
IMF Resident Representative
THE MACROECONOMY IS
GENERALLY SOUND
 Inflation is low
 Real GDP growth is high
 Current account deficit is low
 Fiscal deficit is low
 Gross official reserves are
adequate
 Exchange rate is stable
INFLATION IS MANAGEABLE
4
3.5
3
2.5
2
1.5
1
0.5
0
-0.5
-1
1999
2000
2001
2002
2003
2004
REAL GDP GROWTH IS HIGH AND
WILL ENABLE POVERTY REDUCTION
8
7
6
5
Official
IMF Est.
4
3
2
1
0
1999
2000
2001
2002
2003
2004
Annual GDP Growth in the 1990s
8
6
4
2
0
Vietnam
East Asia
Developing
countries
World
SUSTAINABLE CURRENT
ACCOUNT BALANCES
5
4
3
2
Current Account
(as percent of GDP)
1
0
-1
-2
-3
1999
2000
2001
2002
2003
2004
Annual Export Growth in the 1990s
25
20
15
10
5
0
Vietnam
East Asia
Low -income
countries
World
AND A CAUTIOUSLY
EXPANSIONARY FISCAL STANCE
30
25
20
Total Revenue and
Grants
Total Expenditure
15
10
Overall Fiscal
Balance
5
0
-5
1999
2000
2001
2002
2003
2004
OFFICIAL RESERVES
CUSHION IS ADEQUATE
9.4
9.2
9
8.8
8.6
8.4
8.2
8
7.8
7.6
7.4
Gross Reserves (in
week of imports)
1999
2000
2001
2002
2003
2004
SO….WHY DOES VIETNAM
HAVE A PRGF PROGRAM?
 Because growth is a necessary but not sufficient
condition for poverty reduction.
 Good growth matters
 Sustained growth matters: so structural reforms
are essential in the transition process to achieve
Vietnam’s own growth goals.
 …and because the PRGF loans are at highly
concessional rates!
THREE PLANKS OF STRUCTURAL
REFORMS IN THE PRGF PROGRAM
1. Trade liberalization
2. Banking reform
3. SOE reform
….all while maintaining macroeconomic
stability and growth.
TRADE LIBERALIZATION
 Ahead of schedule in AFTA commitments to
reduce QRs and tariffs
 Proceeding with USBTA implementation; full
legislative agenda planned this year
 WTO accession is an achievable goal in the next
4-6 years.
TRADE CREATION IS THE KEY TO JOB
CREATION AND GROWTH—1.4 million new
job seekers every year will need to be absorbed
by a rapidly growing private sector in exports.
BANKING REFORM
Fund focuses on CENTRAL BANK and
SYSTEMIC banking reforms
Vietnam needs to focus on creating a twotiered banking sector, leveling the playing
field in a highly segmented arena, and
developing capital markets
Non-bank financial institutions will play an
increasing role in Vietnam’s transition.
SOE REFORM
The Fund is concerned with the fiscal
consequences of not moving ahead with
SOE reform.
Lack of SOE reform in turn will stall
financial sector reform, as NPLs will
continue to mount.
SOE reform costs are not a high as in other
transition economies.
TRANSITION PARTNERS
 Structural adjustment takes A LONG TIME
 Poverty elimination takes even LONGER
 Institutional reform takes generations
The Fund lacks a comparative advantage in the
above areas. For this reason, we rely on UN
partner agencies, the World Bank, ADB, bilateral
donors and NGOs to provide that expertise.
THE PATH OF VIETNAM’s TRANSITION AS A
MIXED ECONOMY IS THE KEY.
Emergence of a Mixed Economy
Number of domestic private enterprises
Number of foreign enterprises
Share of private sector in non-oil exports
Share of FDI in industrial output
1990 2000
110 35,000
108 2,228
3
52
8.8
34
FDI: the international comparisons
FDI, % of GDP
6
5
4
3
2
1
0
Average LIC
Average East Asia
Average Sub-Saharan
Africa
Vietnam
ODA and FDI flows
Disbursed FDI & ODA
2500
US$ millions
2000
1500
1000
500
0
1993
1994
1995
1996
1997
Disbursed ODA
1998
1999
2000
FDI
2001
(est.)
CURRENT CHALLENGES to
Encourage More FDI and Trade
 Making the exchange rate predictable and at the
same time flexible enough to help push
competitiveness and cushion exogenous shocks.
 Creating a transparent and simple tax base that is
enforceable and encourages investment and
business activity.
 Right-pricing of capital; developing capital
markets
 Leveling the playing field for banks.
 Creating transparent property/asset rights.
THANK YOU!
Visit us virtually at the new IMF Website in
Vietnam:
www.imf.org/hanoi
Or visit us personally in Hanoi:
IMF Office
63 Ly Thai To Street, Suite 601
[email protected]