Policymakers will face stiff challenges in the early part of the forecast period, in terms of the need to strike a balance between stimulating the economy through expansionary fiscal measures on the one hand and containing inflationary pressures on the other. Vietnam has been experiencing double-digit inflation in recent months. The consumer price index (CPI) has risen by more than 10% year on year in the past four months, with the most recent data showing an increase of 12.3% in February. The State Bank of Vietnam (SBV, the central bank) tightened monetary policy in February, after the Tet (Lunar New Year) holidays, raising two main interest rates. However, increases in subsidised retail prices for fuel and electricity are likely to continue to contribute to inflationary pressures, as will the recent devaluation of the dong (which will increase the import bill in the short term).

Policy is also likely to remain biased in favour of rapid economic growth rather than price stability. Although the authorities will remain concerned about the threat of rising inflation, they will not take a coherent and consistent approach to tightening policy in order to keep prices stable, and instead could yet take more controversial steps, such as the use of price controls on private and foreign businesses and lending limits on banks. If implemented, such drastic measures would undermine confidence in economic management in Vietnam. They would also indicate that those in the government who favour a more liberal approach to economic policymaking have been sidelined by others who want to expand the state's involvement in the management of the economy.

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 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 the recent downgrades in international credit ratings.