This paper includes three parts: external economic environment, part one includes: global environment, regional environment, and risks. Vietnam's recent economic development, part two includes: a relatively stable macroeconomic situation, growth at record low, booming exports despite a slowing economy, sharp turnaround in external accounts, inflation dynamics, monetary policy, fiscal policy, and near-term outlook. Structural reforms and medium-term outlook, part three includes: context, restructuring of state-owned enterprises, banking Sector development, and poverty reduction.
Vietnam has navigated the global crisis better than many other countries. GDP grew by 5.3 percent in 2009, accelerating to 6.9 percent in the last quarter of the year. At 5.8 percent, the figure for the first quarter of 2010 was less impressive, but claims that growth has slowed down are most probably unwarranted. Exports declined in 2009, for the first time since the beginning of economic reforms, but their decline was smaller than in other countries of the region. By now export growth is converging back to the 30 percent annual growth rate observed before the crisis. Inflation, which had reached 19.9 percent in 2008, was down to 6.5 percent in 2009. While there were some worrying signs of inflation acceleration in late 2009 and early 2010, by now the monthly increase of the Consumer Price Index (CPI) is again moderate. And as in previous years, there were no banking crises despite the continuation of macroeconomic turbulence. More generally, lack of clarity by markets forces the government to overshoot in its policy reactions. Because markets are not sure to understand what the government is up to, they need to see very strong action in order to be convinced that the right course of action has been taken. As a result, Vietnam has had to go through dramatic shifts in the policy stance as circumstances changed. The stabilization policies of 2008 effectively 'killed' the real estate bubble and brought inflation rates to zero in just a few months, but such speed took a toll on economic activity. The stimulus policies of 2009 were equally strong and determined, but they ended up putting too much pressure on international reserves. With more information disclosure and better communication, policy shifts could perhaps be less extreme. Combined with stronger macroeconomic management, it should be possible for Vietnam to gradually free itself from the 'stop-and-go' cycle that has characterized macroeconomic policies over the last three years.
In the post-global economic crisis environment, Vietnam's economy continues to grow at a reasonably rapid and stable rate. While the speed of global economic recovery has been uneven across the world, Asia as a region has done particularly well. And within Asia, Vietnam's growth performance continues to be impressive. As shown in left panel of, Vietnam was one of the fastest growing economies in the East Asia and Pacific (EAP) region prior to the global economic crisis and has remained so in the post-crisis period as well1. After registering a real gross domestic product (GDP) growth of 5.3 percent in 2009, Vietnam's economy is expected to grow between 6.5-6.7 percent in 2010. Vietnam, like China, stands out not only for achieving a higher average growth rate but also a more stable growth path. This however has meant that the speed with which the Vietnam's economy is bouncing back from the lows of 2009 appears to be less impressive than countries that experienced negative growth last year. This edition of 'Taking Stock' a semi-annual publication from the World Bank attempts to understand the recent macroeconomic changes in Vietnam. It documents changes to the macroeconomic outcomes and policies with a view to inform policy discussions in the country. The analysis is mostly retrospective in nature, though discussions on prospective challenges and outlook are also briefly mentioned. Developments in the global economy in general and in the EAP region in particular are juxtaposed against Vietnam's own economic outcomes and policies to provide a more complete and nuanced picture of the issues.
