||USD186.2bn (World ranking 56, World
||90.7 million (World ranking 14, World Bank
|Form of state
|Head of government
||Nguyễn Xuân Phúc
- Low wages but relatively skilled workforce
- Strong performance in agriculture and potential with various natural resources, especially minerals (iron ore, copper, gold) and energy (oil, natural gas, coal)
- Relatively open economy with growth model based on trade
- Ongoing shift towards higher value-added sectors
- Member of the Trans-Pacific Partnership
- Lack of transparency
- A fragile and opaque banking system
- Infrastructure to be improved
- A complicated business environment
- High regional disparities in terms of development and rising inequalities
- Low external reserves
- Recurrent tensions with China
Vietnam's standing on the Ease of Doing Business ranking improved to 90th in 2016 (from 93rd). Progress was made on the tax environment and insolvency resolution. As a member of the TPP project, further improvement is likely in the medium term especially on investor protection, on enforcing contract laws and insolvency resolution.
The public debt is high compared to regional peer with a ratio to GDP above 60% GDP. The fiscal deficit is large. Looking ahead, there are few if any signs that this trend will reverse significantly after 2016. First, weak commodities prices will remain a drag on government revenues growth despite some improvement in tax collection (broadened tax base e.g.) and higher duties on petroleum products. Second, the policy stance will likely remain broadly accommodative with the reduction in corporate income tax in 2016 (20% from 22% in 2015), and still solid growth of public expenditures.
The external liquidity position is weak with FX reserves covering hardly 2-3 months of imports. Currency risk is elevated with 3 devaluations in 2015. External conditions are not fully supportive in the short run. The current account surplus is weakening as imports (led by high domestic demand) growth outpaced exports. FDI inflows are strong as the country is seen as a strong alternative to China but strong short-term capital outflows (due to the Fed’s tightening) are still a drag. Risks related to the banking system have receded with improved liquidity and lower NPL. However, a cause of concern still stems from weak profitability and low capital buffers.
Last review: 06/22/2016