On 5 June 2017 the IMF issued a report following the completion of discussions with Vietnam under Article IV of the IMF’s articles of agreement.
The report notes that Vietnam’s economy has been performing well with growth of 6.2% in 2016 and projected growth of 6.3% in 2017, moderating to around 5% in the medium term. The momentum for growth remains strong despite weakness in the oil sector and there has been strong manufacturing activity and foreign direct investment as well as robust domestic demand.
The government is developing a wide reform agenda. Fiscal consolidation is required owing to rising public debt. Bank reforms are progressing but the problem of non-performing loans needs to be resolved. Progress has also been made on the framework for the reform of state owned enterprises although implementation has been slow. The reforms aim to promote sustainable growth led by the private sector.
Downside risks to the economy include high public debt, slow resolution of the problem of non-performing loans, rising protectionism globally and the failure of the Trans Pacific Partnership. However the successful implementation of the reform agenda could increase the potential for economic growth. Implementation of the trade agreement with the European Union and other bilateral agreements could increase the level of exports and foreign direct investment.
In their report the IMF emphasized the importance of measures to enhance revenue such as unifying the VAT rates, increasing the level of excise and environmental protection taxes, and introducing a property tax. The IMF also encouraged Vietnam to reduce tax exemptions and incentives and to strengthen the tax administration.
The IMF directors welcomed the ongoing structural reforms and noted that reform of institutions is necessary to increase potential growth. They emphasized that higher environmental taxes and better pricing of externalities in the energy sector could encourage a more environmentally friendly and resilient economy.