International Monetary Fund. Asia and Pacific Dept
This 2019 Article IV Consultation with Vietnam highlights that gradual fiscal consolidation, strict limits on government guarantees and robust growth in recent years have led to declining government debt, expected to continue under current policies. But while there is some fiscal space, fiscal needs are large, for infrastructure, social spending and to deal with population aging. The tightening of credit growth continued in 2018; however, liquidity remained ample, aided by the strong balance of payments and tight fiscal policies. The State Bank of Vietnam has initiated plans to modernize its monetary framework with IMF technical support. The authorities’ efforts to improve economic institutions and governance continue and the fight against grand corruption has resulted in significant sentences in recent high-profile cases. Improvements in transparency and statistical systems are underway, with support from the IMF and the Financial Action Task Force’s Asia Pacific Group.
Mr. Manuk Ghazanchyan, Ricardo Marto, Jiri Jonas, and Kaitlyn Douglass
We use a dynamic small open economy model to explore the macroeconomic impact of
alternative public investment scaling-up scenarios, analyzing how improving the
efficiency of capital spending and of tax revenue collection affect growth and debt
sustainability for three fast-growing Southeast Asian economies: Cambodia, Sri Lanka,
and Vietnam. We show that a gradual public investment profile is more favorable than
front-loading capital spending because we assume governments are able to gradually learn
how to invest more efficiently, accelerating public capital accumulation and therefore
growth. We discuss the pros and cons of alternative financing options and identify the
financing mix that generates the best macroeconomic outcome. Sometimes overlooked,
improving the efficiency of revenue collection over time may ease the burden of fiscal
adjustment, achieving higher GDP growth with substantially lower debt-to-GDP ratios,
and will help policymakers efficiently meet the challenge of addressing large
infrastructure gaps while maintaining debt sustainability.
This Selected Issues paper discusses the assessment of economic activity in Togo in absence of quarterly GDP series. Togo collects about 40 macroeconomic indicators monthly that span a wide range of sectors of the economy. The selection of the variables for the economic activity index is conducted by finding the combination of variables. The indicators are aggregated into an index using a methodology used by the Conference Board. Then an economic activity index is constructed that effectively replicates the historical growth rates of real GDP in Togo. The selected index minimizes the deviations between the growth rates of the indicator and actual real GDP growth over 2002–13.
This Selected Issues paper argues that for Ethiopia to continue sustaining robust growth, leveraging the transformation power of the private sector, especially entrepreneurs, is essential. Although Ethiopia’s public sector-led development strategy has delivered strong results over the past decade, it has been facing significant challenges in recent years. A model-based analysis of the country’s investment program indicates that, despite positive long-run growth effects, transition challenges and macroeconomic trade-offs are associated with different financing strategies. Heavy reliance on domestic bank borrowing may require substantial fiscal and macroeconomic adjustments as well as entail a sharp increase in inflation. External commercial borrowing, on the other hand, may ease these adjustments but at the cost of significant increases in debt to gross domestic product ratios. Comparing Ethiopia’s development experience—especially in terms of structural transformation and competitiveness—with that of selected Asian countries indicates differences which point to possible adjustments in Ethiopia’s development approach.
This report examines macroeconomic developments and related vulnerabilities in low-income developing countries (LIDCs)—a group of 60 countries that have markedly different economic features to higher income countries and are eligible for concessional financing from both the IMF and the World Bank. Collectively, they account for about one-fifth of the world’s Population.
This Selected Issues paper on Bangladesh reviews institutional developments in the foreign exchange market since 2002. In 2002, there have been several aspects of the financial system and exchange market in Bangladesh that posed impediments to a floating exchange rate system. The financial system has been dominated by state-owned commercial banks with assets amounting to about 24 percent of GDP and accounting for some 46 percent of industry net assets. Market interventions have been largely confined to building foreign exchange reserves and to countering rare disorderly market conditions.
This Selected Issues paper assesses the impact of Vietnam’s World Trade Organization (WTO) accession. It describes the main terms of Vietnam’s accession as regards trade in goods and services, and uses a partial equilibrium simulation model to estimate the likely impact of WTO accession on revenues and consumer welfare. The paper provides a more general overview of the effects of WTO accession for Vietnam and its main trading partners. It also reviews the main causes of the recent stock market developments and policy measures taken thus far and discusses challenges ahead.