[Vnbiz] EIU Vietnam Country Forecast

[Craig Stevenson]

Vietnam: Country forecast summary
   November 15th 2006
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   COUNTRY VIEW

FROM THE ECONOMIST INTELLIGENCE UNIT

Country forecast overview: Highlights

   - The Communist Party of Vietnam has engineered a seamless transition
   to a new leadership, which offers administrative continuity but also implies
   poor prospects for political reform. The National Assembly is likely to grow
   in influence under the chairmanship of Nguyen Phu Trong, and may come to
   play a more prominent role in holding the government and ministers to
   account.
   - The party's general secretary, Nong Duc Manh, will continue to be a
   stabilising force during his second five-year term in office from 2006 to
   2011. The president, Nguyen Minh Triet, and the prime minister, Nguyen Tan
   Dung, are both economic liberals with strong anti-corruption credentials.
   This high-level commitment to combating graft holds out hope for significant
   progress on this front.
   - Vietnam will seek to maintain close ties with both the US and China.
   There will be occasional diplomatic stand-offs with the US, mainly as a
   result of differences over human rights, but trade and investment links will
   deepen.
   - Vietnam's membership of the World Trade Organisation (WTO), which
   was confirmed in November and is due to take effect in early 2007, will help
   to improve the country's business operating environment. However,
   protectionist lobbies may slow the implementation of trade-related reforms.
   - The government will push ahead with its plans to reform state-owned
   enterprises, but it is unlikely to meet its targets in this area. There
   will, however, be progress in levelling the playing field for private
   enterprises.
   - Real GDP growth will be robust in 2007-11, at an average of 7.3% a
   year, and will be driven mainly by industrial expansion. Business sentiment
   and consumer confidence are likely to remain resilient, boosting investment
   and consumption.
   - Despite some concerns about competitiveness, merchandise exports
   will continue to expand, but buoyant import demand will ensure that the
   merchandise trade account remains in deficit for most of the forecast
   period.
   - Inflation will decelerate throughout the forecast period as
   supply-side pressures, such as rising food and fuel prices, ease. Owing to
   the general weakness of the US dollar, the dong will depreciate steadily,
   rather than rapidly, against the US currency. However, it will weaken
   sharply against the yen.

Country forecast overview: Key indicators
  Key indicators 2006 2007 2008 2009 2010 2011 Real GDP growth (%) 7.6 7.1
7.3 7.3 7.3 7.4 Consumer price inflation (av; %) 7.5 5.1 4.9 4.3 3.8 3.5 Budget
balance (% of GDP) -2.0 -2.9 -3.4 -3.1 -2.7 -2.8 Current-account balance (%
of GDP) 0.5 -1.3 -2.4 -3.9 -4.5 -3.3 Commercial banks' prime rate (av; %)
13.2 13.5 12.0 11.0 10.5 10.1 Exchange rate D:US$ (av) 16,037 16,410 16,850
17,250 17,650 18,070 Exchange rate D:¥100 (av) 13,804 15,629 17,282 18,063
18,877 19,686

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