Taking Stock, July 2017 : An Update on Vietnam’s Recent Economic Developments
A broad-based recovery in global economic activity has been taking hold since late 2016. Industrial production has picked up and global trade accelerated after two years of pronounced weakness. A gradual recovery in commodity prices diminished grow...
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| Format: | Report |
| Language: | English en_US |
| Published: |
World Bank, Hanoi
2017
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| Online Access: | http://documents.worldbank.org/curated/en/737821500266516655/Taking-stock-an-update-on-Vietnam-s-recent-economic-developments-special-focus-towards-a-high-quality-fiscal-consolidation http://hdl.handle.net/10986/28114 |
| Summary: | A broad-based recovery in global
economic activity has been taking hold since late 2016.
Industrial production has picked up and global trade
accelerated after two years of pronounced weakness. A
gradual recovery in commodity prices diminished growth
constraints among commodity exporters, including major
emerging economies. Despite heightened policy uncertainty,
growth in major advanced economies, including the United
States, the European Union, and Japan, has strengthened,
reflecting buoyant domestic demand and rising exports.
Growth in developing East Asia and Pacific (EAP) continues
to be resilient as already robust domestic demand was
supported by a pickup in external demand and a gradual
recovery in commodity prices. After a large surplus in 2016,
Vietnam’s external current account balance started to
decline in early 2017. Robust growth in exports, tourism
receipts, and private remittances led to a current account
surplus of about 4 percent of GDP in 2016, marking the sixth
consecutive year of a widening current account surplus. The
financial account also saw large net inflows of foreign
direct investment (FDI) and long-term loans, allowing the
State Bank of Vietnam to gradually rebuild foreign reserves.
The current account surplus started to decline in early 2017
due to a recovery in import growth. Bolstered by a strong
external position, the nominal exchange rate has been
relatively stable but the real exchange rate continues to
appreciate. The reference rate was devalued modestly by 1.23
percent in 2016 and around 1.3 percent year-to-date in 2017.
Meanwhile, the real effective exchange rate continued to
appreciate by about 5 percent in 2016 and 24 percent since
2010. Real exchange rate appreciation is driven by a large
external surplus of the FDI sector, but is a concern for
Vietnam’s domestic private enterprises, which continue to
face significant external imbalance and competitiveness
challenges. This special focus issue is part of two-part
series on fiscal reforms. While this installment of the
taking stock special topic is focused on specific revenue
and debt management options to underpin more sustainable and
efficient fiscal management, the December issue will focus
on expenditure restructuring. |
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