Vietnam

Vietnam

Country Risk Service

Vietnam
Vietnam at a glance: 2011-15
OVERVIEW The Communist Party of Vietnam's 11th national congress, due in January 2011, is expected to usher in a new generation of leaders and so will set the tone for policy for the next five years. Policymakers will face stiff challenges in the early part of the forecast period (2011-15) in terms of striking a balance between stimulating the economy and containing inflationary pressures. Economic growth in Vietnam is expected to average 7.1% a year in 2011-15, underpinned by strong growth in consumption, investment and exports. However, this forecast is subject to downside risks. Year-on-year consumer price inflation will accelerate to 9.1% in 2011, from 8.7% in 2010. It will then slow to an average of 7.3% a year in 2012-15. Policymakers are likely to face an ongoing battle to keep the dong stable against the US dollar; the Economist Intelligence Unit forecasts that the dong will depreciate from D19,128:US$1 in 2010 to D21,270:US$1 in 2015. The current account will remain in deficit over the next five years, but capital and financial inflows (including official foreign borrowing) will increase from the low levels to which they sank in 2009.

Key changes from last month Political outlook
• The reputation of the prime minister, Nguyen Tan Dung, has been damaged by the near-collapse of one of the country's largest state-owned enterprises, the Vietnam Shipbuilding Industry Group (Vinashin). This could hurt his chances of remaining in office.

Economic policy outlook
• The State Bank of Vietnam (SBV, the central bank) recently tightened monetary policy through a 100-basis-point increase in its main policy interest rate, the base rate. However, the policy bias is likely to remain in favour of rapid economic growth rather than price stability.

Economic forecast
• The loose economic policies that Vietnam has pursued to boost growth have come at a substantial cost in inflationary terms....