1. Macro Assessment of Vietnam economy
Good afternoon everyone,
I am Long from MPD, here are our partners (Chi & Ngoc Anh from Foreign Exchange Management Department, Huy, Huong & Toan from Monetary Financial Stability Department)
So today, we are here to talk to you about the Macro Assessment of Vietnam Economy
Long, Chi, Ngoc Anh, Huy, Huong & Toan

2. Macroeconomic assessment
Structures
Macroeconomic assessment
Monetary policy recommendation
Our presentation is divided into 2 parts: the first section of our presentation is about macroeconomic assessment of Vietnam economy, then we look at monetary policy recommendation

3. Macroeconomic assessment roadmap
Monetary policy stance
International economic conditions
Economic activity
Consumer price
Financial (Monetary conditions)
External balance
Exchange rate
Fiscal policy stance
So now let move on to the first part
As you can see, here is the roadmap for guiding the assessments, so we should go into the individual roadmap factor

4. Output gap is +1.28 (HP) and +0.84 (Linear)
Economic activity
Output gap is
+1.28 (HP) and (Linear)
Lets talk about the first domestic economic condition. Its economic activity
To mesure economic slackness we use the output gap estimated for the period 05-17
As you can see in the chart, some volatility. The economy was doing well 07-09, then after there was a downward trend in the output gap, and then after 2, 3 years the economy was blooming until the 3rd quarter 17. The output gap of past 3 months estimated today is likely positive, (1.28 used by linear or 0.84 used by HP). The assessment helps indicate the economy is performing well.

5. Inflation gap 0, near term weakness
Consumer price
Inflation gap 0, near term weakness
Now I’m talking about the second factor of the roadmap Consumer Price
As you can see inflation estimated today is doing well, we are in the target.
So where it should be? The headline (red one) and the trend (orange line) move together. We think the trend is going to stay low, flat, see the tendency for the headline inflation to go down. So we see weakness in near future

6. Financial (Monetary conditions)
+0.85 for 3M, tight

7. 6% Gap >0  VND too weak (undervalued)
External balance
6% Gap >0  VND too weak (undervalued) MB
ERER ES
Variable
CA/GDP norm
CA under
CA elast
REER gap
REER
Actual REER
NFA 2010
CA norm CA
under
Year
2016
WEO 2016
-2,00
4,10
-0,62
-9,77
1,21
1,15
-4,97
-48,00
-4,80
-14,24 NA

8. 4,3% Gap, overdepreciation
Exchange rate
4,3% Gap, overdepreciation

9. Fiscal policy stance
4% GDP, fiscal impulse -0.2%

10. Monetary policy stance
Neutral

11. International economic conditions
Aggregate demand: +0.5, some acceleration CPI Inflation: 0, some weakness Interest rate: +0.4, tight condition

12. Expected implications for near term
US investors expected the Fed to raise benchmark rate for a third time this December, which make the exchange rate and CPI inflation increase.
The Fed believes that modest inflation has important economic benefits and aims at 2%. An increase in price under Fed or Government control can cause income and corporate profit to rise quickly, boost consumer spending

13. Monetary policy recommendation
Risk assessment
1. Loosen
2. Neutral
Policy options
Loosen
Preferred options

14. Risk assessment matrix
Source of threat
Impact
Domestic risk
CPI Inflation (0, nearterm weakness)
Interactions on exchange rate (vnd appreciation) and capital outflow
Interest rate gap (+0.85)
Alow foreign capital to inflow, then pressure on exchange rate (allow vnd appreciation)
CA gap (+6%), REER gap (+10%, undervalued)
Allow vnd appreciation, allow aggregate demand to down (net export down)
External risks
Aggregate demand (+0.5), CPI (some weakness) and Interest rate (+0.4 tight)
Allow vnd depreciation