The IMF said trade tensions and volatility affected Vietnam in 2018, but the economy had remained resilient, fueled by growth in middle class incomes and consumption, a strong harvest and surging manufacturing.
The strong economic momentum is expected to continue in 2019, aided by competitive labour costs and other strong fundamentals, including a diversified trade structure, and recently signed free trade agreements which are spurring reforms, according to the IMF.
However, Vietnam’s gross domestic product (GDP) growth is expected to fall to 6.5 percent in 2019 due to weakening external conditions, the IMF said.
The country’s inflation would increase from 3.5 percent in 2018 to 3.6 percent and 3.8 percent in 2019 and 2020 respectively, it added.
The IMF’s executive directors welcomed Vietnam’s improvements in tax policy and administration, including higher environmental taxes, the tightening of government guarantees and lower current spending, which helped cut public and publicly guaranteed debt.
They noted that the focus should be on the quality of adjustments to keep public debt on a declining path and create room for priority infrastructure and social spending, prepare for rapid prospective population aging, and deal with the effects of climate change and digitalisation.
The directors also welcomed Vietnam’s monetary and credit policies stance, especially declining credit growth which is helping Vietnam cement macroeconomic stability.
The IMF experts called on the Government to push ahead with reforms to reduce remaining barriers to investment, including improving access to land and credit, which would boost private investment and raise worker productivity and growth.