Policymakers have embarked on a process of tightening economic policy, but concerns persist over whether there is sufficient political will to implement tougher measures that may be needed to stabilise the economy. The State Bank of Vietnam (SBV, the central bank) has tightened its monetary policy stance by pushing up its policy interest rates in recent months, but inflation is likely to remain in double digits in the short term-the sharp devaluation of the dong will create greater imported inflationary pressures, while the government has had to increase subsidised retail prices for fuel and electricity, owing to sharp rises in global crude oil prices recently. The government has also signalled its intention to tighten its fiscal policy stance, and further administrative measures may be introduced to slow the pace of growth in domestic credit. However, in the light of the government's general policy bias in favour of rapid economic growth rather than price stability, there is a risk that if the pace of growth does not pick up in the coming quarters (growth fell to 5.4% in the first quarter of 2011) that the authorities will return to a pro-growth policy.

In the wake of the Vinashin debt debacle-in late December 2010 Vinashin defaulted on the first scheduled repayment of an eight-year US$600m international syndicated loan-there is likely to be greater scrutiny of the financial health of SOEs and their role in the economy over the next five years. Although the authorities will continue to make steady progress in implementing the policy of equitisation (part-privatisation) of SOEs, as there is a large number of SOEs with an approved equitisation plan, there is unlikely to be a rapid acceleration in the number of firms undergoing such reform during the period. Perhaps more importantly, the authorities may need to reconsider the policy of encouraging some of the largest SOEs to follow a debt-driven expansion plan. Indeed, it will be more expensive and more difficult for SOEs to access funding in the wake of recent downgrades in international credit ratings.