IMF hails Vietnam’s moves to cushion COVID-19 impacts

The Executive Board of the International Monetary Fund (IMF) has highly valued Vietnam’s policy support to cushion the impact of COVID-19 in tandem with successful maintenance of fiscal, external, and financial stability and an impressive vaccination rollout.

In a press release following a recent consultation with Vietnam, the IMF Executive Board said a recovery is underway and high frequency indicators point to stronger momentum going into 2022, with rising retail sales, industrial production, and firm entry. Growth is expected to reach 6% in 2022 as activity normalisation continues and the programme for recovery and development is implemented.

However, the recovery of the labour market is lagging as underemployment remains high. While inflation has recently picked up due to rising commodity prices and supply-chain disruptions, it remains well below the central bank’s inflation ceiling.

The Executive Board called for agile policy making, proactively adjusted to the pace of the recovery and evolution of risks.

They also underscored the need for fiscal policy to take the lead and be flexibly adjusted to evolving economic conditions. They welcomed the programme for recovery and development and emphasised the importance of targeting, spending efficiency, and steadfast implementation.

The IMF executive board stressed the need for monetary policy to be nimble and vigilant of inflationary risks. They also emphasised the importance of addressing problem loans, normalising regulatory forbearance in a timely fashion, and closely monitoring real estate sector risks.

They welcomed Vietnam's recent steps towards greater exchange rate flexibility and monetary policy modernisation and encouraged continued efforts in this direction.

The board stressed the importance of structural reforms to improve the business environment, enhance productivity, and boost potential growth. They also praised Vietnam’s ambitious environmental agenda and urged the translation of targets into concrete policy actions./.