AN UPDATE ON VIETNAM'S RECENT ECONOMIC DEVELOPMENT

Outline of the Presentation

ACHIEVEMENTS

Relatively stable macroeconomic conditions

Strong external balance

Mixed signals from foreign investors

CHALLENGES

Longest spell of slow growth since the onset of economic reforms in the late-1980s

State’s Finances are Under Stress

Slow progress on structural reform and limited results

NEAR-TERM OUTLOOK AND RISKS

Slow growth phase to persist in the medium-term

2

Relatively Stable Macroeconomic

Conditions

3

MODERATE

INFLATION

STABLE

EXCHANGE

RATE

INCREASE IN

RESERVES

REDUCED

SOVERIGN

RISKS

Relatively Stable Macroeconomic

Conditions

4

0

5

10

15

20

25

J-11 A-11 J-11 O-11 J-12 A-12 J-12 O-12 J-13 A-13 J-13

Inflation rate (y/y, in %)

Resolution 11

16000

18000

20000

22000

J-1

1

M-1

1

M-1

1

J-1

1

S-1

1

N-1

1

J-1

2

M-1

2

M-1

2

J-1

2

S-1

2

N-1

2

J-1

3

M-1

3

M-1

3

Exchange rate (VND for 1 US$)

Resolution 11

1.6

1.9 1.8

1.6

2.2 2.3 2.3

2.72.8

0

1

2

3

Q1-11 Q3-11 Q1-12 Q3-12 Q1-13

International reserves (in months of imports)

Resolution 11

0

100

200

300

400

500

600

700

J-1

1

M-1

1

M-1

1

J-1

1

S-1

1

N-1

1

J-1

2

M-1

2

M-1

2

J-1

2

S-1

2

N-1

2

J-1

3

M-1

3

M-1

3

Cost of borrowing in the international capital markets

Resolution 11

Sovereign spreads

CDS, 5 years

Strong External Accounts

5

STRONG

GROWTH

INCREASING DIVERSIFICATION

RECORD

TRADE

SURPLUS

HIGEST EVER

CURRENT

ACCOUNT

SURPLUS

Strong External Accounts

6

Crude oil20%

Rice4%

Agriculture

20%Garments

16%

Footwear11%

Electronics &

computers

3%

Other26%

2002Crude oil

7%

Rice3%

Agriculture9%

Garments13%

Footwear7%

Electronics &

computers7%

Phones and parts11%

Tranport vehicles

and parts4%

Machinery and parts

4%

Plastic products

3%

Other32%

2012

-2.7-4.0

-2.4 -2.7-1.4

-3.6 -3.0-4.2

-6.4

-8.9 -9.4-11.6

-20.2

-24.7

-17.2

-14.8-16.1

-11.5

-4.3

-0.1

0.2 0.0 0.6 1.22.5 1.8 1.2 1.3

3.44.9

6.5 6.1 6.6

4.32.2

6.3

12.3

3.6

-25

-20

-15

-10

-5

0

5

10

15

1995 1997 1999 2001 2003 2005 2007 2009 2011 4m-13

Domestic sector

FDI sector

Total

Vietnam’s Exports Basket has Changed Considerably in the Past Ten Years

Trade Balance (in US$ billion): Domestic Vs. ForeignExternal Accounts (% of GDP)

-11.0

-6.0-3.8

0.2

5.9

12.6 11.1

6.1 5.3

5.8

-15

-10

-5

0

5

10

15

2008 2009 2010 2011 2012e

Capital account

Current account

Overall balance

Surplus

Deficit

Foreign Investors: Worried, But Remain

Optimistic About the Future

7

FDI/GDP

DECLINING

EXISTING &

NEW

COMPETITORS

VIETNAM

REMAINS AN

ATTRACTIVE

DESTINATION

Source: 2012/13 ASEAN Business Outlook Survey by AmCham

Singapore and US Chamber of CommerceSource: 2012/13 National Business Survey of the Singapore

Business Federation

Foreign Investors: Worried, But Remain

Optimistic About the Future

8

8.0

11.5

10.011.0 11.0

10.5

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012

FDI Implemented (in USD Billion)

10%12%

10% 10%

8%

7%

0%

2%

4%

6%

8%

10%

12%

14%

2007 2008 2009 2010 2011 2012

FDI Implemented (% of GDP)

ACHIEVEMENTS



Mixed signals from the foreign investors

CHALLENGES






9

Longest spell of slow growth since start

of Doi Moi

10

SLOW

GROWTH

RELATIVE TO

PAST

SLOW

GROWTH

RELATIVE TO

REGIONAL

PEERS

FALLING

INVESTMENT

RATE

DECLINING

RETAIL SALES

GROWTH

Longest spell of slow growth since start

of Doi Moi

11

5.1

9.5

4.8

7.8

5.4

6.4

4.9

3

5

7

9

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

Real GDP Growth (%)

annual3-year moving average

East Asian Crisis

Global Economic CrisisBreak-up of Soviet Union ????

11.9

8.8

5.9 6.35.2

6.16.8

5.85.4 5.7

4.34.8

0

2

4

6

8

10

12

14

Pre-Crisis Post-Crisis

China Indonesia

Philippines Vietnam

Malaysia Thailand

Real GDP growth rate (in %)

15.9 12.9 15.9 14.7 12.3 11.5 10.9

16.4

13.413.3 13.9

12.8 11.9 10.9

10.4

11.810.0 9.9

8.27.1 7.8

42.7

38.2 39.2 38.5

33.330.5 29.6

0

10

20

30

40

50

2007 2008 2009 2010 2011 2012 q1-13

Total

Foreign

Non-state

(domestic)

Investment by ownership (% of GDP)

0

6

12

18

24

30

36

M-08 M-09 M-10 M-11 M-12 M-13

Retail Sales and Services (in %)

Real growth (%)

Nominal growth (%)


12

HIGH FISCAL

DEFICITS

INCREASING

DOMESTIC

DEBT/GDP

RATIO

DECLINING

REVENUE

FALLING

CAPITAL

SPENDING


13

0.4

3.6

2.2

7.2

3.03.5

4.84.5

-0.4

2.5

1.1

6.1

1.82.2

3.6 3.3

-2

0

2

4

6

8

2006 2007 2008 2009 2010 2011E 2012E 2013B

Deficits to GDP ratio (in %)

Fiscal deficit

Primary deficit

19 21 2

6 30

29

27

27

26 29 30

28 29

4

8

9

13 14

16 18

17 1

8 22

20 2

3

23

29

35

42 44 43 45 4347

5248

52

0

10

20

30

40

50

60

2001 2003 2005 2007 2009 2011

External

Domestic

Debt

Total

Debt

Debt to GDP ratio (in %)

24

.3

23

.5

24

.4

20

.6

22

.4

21

.1

20

.5

19

.8

2.8 2.7 2.0

2.51.9

1.4 1.0 1.2

1.8 2.7 2.2

2.22.4

1.61.2 1.1

29.7 29.4 29.3

25.827.3

24.322.8 22.1

0

5

10

15

20

25

30

35Total

Grant

Capital

Fees, non

tax and

charges

Tax

Revenue to GDP ratio (%)

16

.9

17

.9

18

.5

20

.3

19

.7

18

.1

18

.7

19

.3

20

.3

19

.5

9.2 9.4 9.1 9

.1

11

.8

14

.9

11

.6

8.5 7.8

7.1

0

5

10

15

20

25

30

35 Expenditure to GDP ratio (%)

Capital

Recurrent

Banking Sector Restructuring

• Financial sector remains fragile, but

risk of a systemic crisis has receded.

• Restoration of macroeconomic

stability and tight credit policy of SBV

have prevented the vulnerabilities

from growing bigger.

• Establishment of the Vietnam Asset

Management Company (VAMC) has so

far been the most visible step on the

part of the Government to resolve the

NPL problems.

• Resolution of NPLs will, however,

require a proactive multi-pronged

approach.

SOE Reforms

• More than two years after the

government set out to reform the SOE

sector, progress has been limited.

• Work is ongoing to build on the

existing legislation to create a

comprehensive framework for the

management of SOEs.

• Successful restructuring of SOEs will

be difficult to achieve without strong

inter-agency coordination and

improved transparency.

Slow Progress on Structural Reform

and Limited Results

14

ACHIEVEMENTS



Mixed signals from the foreign investors

CHALLENGES






15

Near-term Outlook

The economy is grow at a moderate rate

of around 5.3 percent during 2013 and 5.4

percent in 2014.

Inflation is expected to increase to around

8.2 percent at the end of the year.

Risks to the Outlook

Change in monetary and fiscal policy

stance risk stoking inflationary pressures

Delayed implementation of structural

reforms could undermine investors’

confidence and worsen growth prospects

further.

Slow Progress on Structural Reform

and Limited Results

16

2010 2011 2012/e 2013/p 2014/p

Real GDP (% change, y-y %) 6.4 6.2 5.2 5.3 5.4

Consumer price index (% change, year-end) 11.7 18.1 6.8 8.2 7.9

Government fiscal balance (% GDP) -2.8 -2.9 -4.8 -4.0 -4.0

Public sector debt (% GDP) 51.7 47.9 51.3 50.4 50.5

Current account balance (% of GDP) -3.8 0.2 5.9 5.6 3.3

Vietnam’s Key Economic Indicators

Thank

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