Latest news with #PauloMedas
The Star
16 hours ago
- Business
- The Star
Global uncertainty weighs on Vietnam's economic outlook
Dragon fruit prepared for export in Bình Thuan Province. Vietnam's economic outlook is heavily dependent on the outcome of trade negotiations. — VNA/VNS HANOI: Vietnam's economic outlook is heavily dependent on the outcome of trade negotiations and is constrained by elevated global uncertainty on trade policies and economic growth, according to an International Monetary Fund (IMF) team led by Paulo Medas. The team has concluded discussions for the 2025 Article IV consultation with Vietnamese authorities from June 11 to 24. According to the IMF team, high tariffs will likely take effect in the third quarter. In such a scenario, economic growth is projected to slow to 5.4 per cent in 2025 and decelerate further in 2026. However, if global trade tensions subside, the economic outlook would improve significantly. 'Downside risks are high. A further escalation in global trade tensions or a tightening of global financial conditions could weaken further exports and investment,' Paulo said. Domestically, financial stress could re-emerge from tighter financial conditions and high corporate indebtedness, he added. On the upside, achieving non-discriminatory trade agreements and successfully implementing planned infrastructure and structural reforms could significantly boost medium-term growth. 'Given the uncertain outlook, policy priorities should focus on preserving macro-financial stability while navigating economic adjustments. Fiscal policy, supported by a low level of public debt, should take the lead in cushioning the near-term impact, especially under downside scenarios. Accelerated implementation of public investment and strengthening social safety nets would be important,' he stressed. He pointed out that monetary policy has much more limited room and should be decisively focused on anchoring inflation expectations. Allowing the exchange rate flexibility will be critical as the economy adjusts to the external shock. Some monetary easing could be considered if global interest rates decline as expected and inflation falls. Vigilance is needed to monitor and act against inflation pressures that may arise, including due to external shocks. These challenges underscore the importance of modernising the monetary policy framework to enhance its effectiveness and anchor stability, including by replacing credit growth limits with an improved prudential framework. 'Further efforts are needed to strengthen financial sector soundness. To bolster banking system resilience, priorities include strengthening bank supervision, build liquidity and capital buffers, and further improving the bank resolution framework,' he said. 'The Government's plans for an ambitious reform agenda are very welcome and could boost medium-term growth, but implementation will be key.' — Vietnam News/ANN
Fibre2Fashion
3 days ago
- Business
- Fibre2Fashion
Vietnam's GDP growth projected to slow to 5.4% in 2025: IMF
Assuming that high US tariffs take effect in the third quarter (Q3) this year, economic growth in Vietnam is projected to slow to 5.4 per cent in 2025 and decelerate further in 2026, according to the International Monetary Fund (IMF). However, if global trade tensions subside, the economic outlook would significantly improve, the IMF said after one of its teams recently concluded the 2025 Article IV consultation with Vietnamese authorities. Assuming that high US tariffs take effect in Q3 2025, Vietnam's GDP growth may slow to 5.4 per cent this year and drop further in 2026, the IMF said. If global trade tensions subside, the outlook would significantly improve. “The outlook is heavily dependent on the outcome of trade negotiations and is constrained by elevated global uncertainty on trade policies and economic growth,†it noted. 'The outlook is heavily dependent on the outcome of trade negotiations and is constrained by elevated global uncertainty on trade policies and economic growth,' the IMF team leader Paulo Medas noted. 'Downside risks are high. A further escalation in global trade tensions or a tightening of global financial conditions could weaken further exports and investment. Domestically, financial stress could re-emerge from tighter financial conditions and high corporate indebtedness,' he said. 'On the upside, achieving non-discriminatory trade agreements and successfully implementing planned infrastructure and structural reforms could significantly boost medium-term growth,' he said. 'Given the uncertain outlook, policy priorities should focus on preserving macro-financial stability while navigating economic adjustments. Fiscal policy, supported by low level of public debt, should take the lead in cushioning the near-term impact, especially under downside scenarios. Accelerated implementation of public investment and strengthening social safety nets would be important,' medas observed. 'Monetary policy has much more limited room and should be decisively focused on anchoring inflation expectations. Allowing the exchange rate flexibility will be critical as the economy adjusts to the external shock. Some monetary easing could be considered if global interest rates decline as expected and inflation falls,' he noted. 'Further efforts are needed to strengthen financial sector soundness. To bolster banking system resilience, priorities include strengthening bank supervision, build liquidity and capital buffers, and further improving the bank resolution framework,' he added. Fibre2Fashion News Desk (DS)
