Country Report Vietnam March 2011

Outlook for 2011-15: Fiscal policy

The government will maintain a fairly loose fiscal policy stance in the next five years. Calming worries over the government's fiscal health, government revenue grew sharply in 2010, contributing to an estimated budget deficit in that year equivalent to 5.9% of GDP, a slight improvement from the deficit of 6.2% that was posted in 2009. Although the deficit will decrease slightly over the forecast period, it will remain above 5% of GDP, with spending on infrastructure and social welfare programmes remaining high-the IMF has voiced serious doubts as to whether a planned reduction in investment spending will be achieved. Government revenue will continue to be supported to some extent by strong economic growth and by generally higher global prices for crude oil (as the Vietnamese government derives substantial tax revenue and royalties from the oil and gas sector). However, the need for the government to rein in the fiscal deficit and avoid financing problems has become more apparent given that outstanding public debt is estimated to have reached nearly 57% of annual GDP at the end of 2010.

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