Finance in Transition : Unlocking Capital Markets for Vietnam’s Future Development
The Vietnamese economy has done well in 2019. In the context of increasing global uncertainty,Vietnam will most certainly be among the fastest growing economies in the world, with a GDP growth rate of approximately 6.8 percent. This rate is almost...
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| Language: | English |
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/971881576078190397/Finance-in-Transition-Unlocking-Capital-Markets-for-Vietnam-s-Future-Development http://hdl.handle.net/10986/33075 |
| Summary: | The Vietnamese economy has done well in
2019. In the context of increasing global
uncertainty,Vietnam will most certainly be among the fastest
growing economies in the world, with a GDP growth rate of
approximately 6.8 percent. This rate is almost three times
faster than the world average (2.6 percent) and 1.2
percentage points higher than the average in East Asia and
Pacific, according to the latest estimates from the World
Bank’s Global Economic Prospects. This robust growth
performance was attained thanks to the contribution of two
key factors: export growth and domestic demand from
households and firms. The first factor reflects the
performance of the exports sector, growing by about 8.4
percent between January and September 2019, which is lower
than in the recent past (15.8 percent in the same period in
2018), but three times higher than the global average.
However, this expansion can be short-lived as it captures to
some extent the diversion of Chinese exports toward Vietnam
due to the trade tensions between China and the
UnitedStates. As a matter of fact, the value of exports
toward non-U.S. markets increased by only 3.8percent in
2019. The second contributing factor reflects the rapid
expansion of the middle class, as the number of people
living on more than US 15 Dollars per day increases by about
1 million every year. The demand of the burgeoning middle
class has been met to a great extent by purchases of foreign
products, as the imports of consumption goods have been
rising by about 15 percent per year since 2015. The
contribution of exports and private demand to GDP growth has
allowed the government to maintain its prudent fiscal and
monetary policies. On the fiscal front, the authorities have
managed to reduce their fiscal deficit (down by 0.1 percent
of GDP) due to higher-than-expected revenues and a very low
execution of capital investment expenditures; the latter
has been persistently low since 2015. As a result, the
debt-to-GDP ratio (the Ministry of Finance’s definition) is
estimated to have declined from 58.4 to 56.1 percent from
2018 and 2019. The authorities have thus been able to
rebuild additional fiscal space by reducing public borrowing
by almost 8 percentage points of GDP since 2016, though
lower capital spending has also depressed potential growth. |
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