Outlook for 2011-15

• The Communist Party of Vietnam (CPV) will keep a firm grip on power in the next five years, and, despite signs of factional splits between conservative hardliners and reformers, there is no prospect of any major internal instability.
• Policymakers will face stiff challenges in the early part of the forecast period in terms of striking a balance between stimulating the economy and containing inflationary pressures.
• Real GDP growth in Vietnam is expected to average 7.2% a year in the forecast period, underpinned by strong growth in consumption, investment and exports. However, this forecast is subject to downside risks.
• Consumer price inflation will accelerate to an average rate of 14.3% in 2011, from 9% in 2010, before slowing to an average of 7.8% a year in 2012-15.
• Policymakers are likely to face an ongoing battle to keep the dong stable against the US dollar. The Economist Intelligence Unit forecasts that the dong will depreciate from D19,127:US$1 in 2010 to D23,873:US$1 in 2015.
• The current account will remain in deficit over the next five years, but capital and financial inflows (including official foreign borrowing) will increase from the low levels that they reached in 2009.

Monthly review

• The prime minister, Nguyen Tan Dung, announced a series of measures designed to constrain rapid credit growth and force state-owned enterprises and commercial banks to be cautious about how they spend or lend money.
• On the foreign policy front, Vietnam scored something of a coup when Indonesia said that it would take up Vietnam's goal of establishing multilateral talks on territorial claims over the South China Sea.
• The State Bank of Vietnam (the central bank) has adjusted the dong's peg to the US dollar from D18,932:US$1 to D20,693:US$1, and it has also tightened monetary policy by putting up two key interest rates.
• Consumer price inflation rose by 12.3% year on year in February, compared with 12.2% in January.
• Electricity prices were increased by 15% on March 1st. This followed an increase in subsidised retail fuel prices on February 24th, when petrol prices rose by 17% and diesel prices were set 24% higher.
• In February the merchandise trade deficit expanded to US$950m from a revised estimate of US$877m in January.