Inflation is seen easing to 7.5% on average this year before
quickening to 8.2% in 2014. This view assumes reasonable weather for
food production, a broadly stable dong exchange rate, and restrained
policy stimulation. The trade surplus is expected to climb to a record
$12.5 billion in 2013 and the cur...
rent account surplus to increase further
this year before easing in 2014 as imports accelerate in tandem with GDP
growth (Figure 3.31.11).
Risks to the outlook center on the soundness of the banking system
and the scale of NPLs. The NPL problem started spreading to the
interbank money market from late 2011, when some banks were unable
to recover funds provided to smaller banks with high NPLs. The central
bank responded last year by, among other measures, restricting banks
with interbank debts overdue by more than 10 days from borrowing
through the interbank market. Those measures reduced interbank
transaction risks but also restricted the functioning of the market.
The central bank eased some restrictions at the start of this year.
A finance sector assessment, conducted by the International
Monetary Fund and the World Bank with the agreement of the
government, will be completed this year. Meanwhile, the authorities
have introduced regulation that requires commercial banks to increase
risk provisioning against NPLs and report on loan classification by
June 2013. Compliance might take longer because banks need to upgrade
their accounting systems. The central bank’s supervisory and regulatory
functions need to be strengthened to ensure compliance with the new
Cleaning up bank balance sheets would pave the way for a more
robust expansion of lending. With this in mind the central bank intends
to establish an asset-management company to acquire bad loans from
banks. Adequate funding will be critical to the success of this plan, as will
a transparent process by which assets are priced and an insolvency system
with improved capacity to manage the resolution of distressed assets.
Source: State Bank of Viet Nam; ADB estimates ( http://www.sbv.gov.vn )
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