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Macroeconomics Report: Oil, money flows and public debt – threats to Vietnam’s macro-stability

Currently, there are significant fundamental changes in the global economy. Small and medium emerging and developing countries are likely to be the most vulnerable. That is due to their weaker buffer and resistance mechanisms against external risks. In this report, we look at the most important factors and the early warnings for Vietnam.

• Rising oil prices, reversing money flows and increasing public debt, which were the root of historical crisis. Such issues have created significant fluctuations in global financial market since the middle of the year.
• Vietnamese lawmakers and investors need to keep an eye on external debt, cost-push inflation as well as capital market openness.

In our opinion, Vietnam’s economy is vulnerable to mid- and long-term external risks. In 2019, concerns about cost-push inflation, always driving the decisions of policymakers, will be a key point as basic good prices are ready to go up.

The issue of surging short-term external debts is also to be highlighted. External debt by corporates is significantly moving up. While the growth of foreign money flows is essential for the economy, the government also needs to extend the role of the domestic financial market in order to absorb such flows.