Hanoi (VNA) - Vietnam can return to high growth rates over the mediumterm, as structural reforms are implemented, Division Chief of the InternationalMonetary Fund (IMF)’s Fiscal Affairs Department Paulo Medas has said.

Medas led an IMF team to Vietnam from June 14-29 to holddiscussions for the 2023 Article IV consultation with the country.

In an interview granted to the VietnamPlus e-newspaper under the Vietnam News Agency (VNA), hesaid that Vietnam’s economic growth is projected to recover in the second halfof 2023, reaching around 4.7% for the year, supported by a rebound in exportsand expansionary domestic policies. Inflation is expected to remain containedbelow the State Bank of Vietnam’s 4.5% ceiling.

The IMF predicts the world economy will continue facingdifficulties in 2024 and can only recover in 2025, he said.

According to him, the measures taken by the central bank andthe government such as interest rate cuts, tax reduction, and public investmentand spending expansion have helped soften the impact of external and domesticheadwinds.

The expert stated that the SBV was able to both containprice and liquidity pressures in a very challenging environment. Greaterexchange rate flexibility and continued efforts to modernise the monetarypolicy framework will provide significant dividends.

Further monetary policy easing, and measures to boost creditgrowth, at this stage will likely be less effective and more risky, givenglobal rates are likely to stay high for long, and banks in Vietnam are alreadyfacing rising non-performing loans and high loan-to-deposit ratios, he noted.

In this context, fiscal policy should take the lead inproviding support to the economy and the poorest and most vulnerable groups,especially as the government has fiscal space. The planned increase in spending(wages and public investment) and cut in taxes will help boost domestic demand.

“The current challenging economic environment and risingnon-performing loans require the swift development of an action plan to protectfinancial stability and accelerating needed reforms. This would includestrengthening the bank crisis management framework and improving bankregulation and supervision. The authorities should take advantage of theongoing revision of the Law on Credit Institutions to develop more effectivebank resolution and emergency liquidity frameworks,” Medas said.

To help Vietnam achieve its future macro-economic managementgoals, the IMF expert stressed that the government needs to maintain its reformefforts in the medium term to achieve the set medium and long term goals andbecome a developed economy by 2045 and to ensure total greenhouse gas emissionswill be reduced to zero by 2025.

It is also necessary to reform the business environment byreforming administrative procedures, creating favourable conditions for thedevelopment of enterprises, invest in infrastructure, ensure renewable energyin the next 5-10 years, and pour capital into technology in education andtraining, he added./.