Vietnam fiscal deficit to remain high: Fitch

Vietnam’s fiscal deficit is expected to remain at a high 5.7 percent of GDP in 2019, according to macro research firm Fitch Solutions.

 

The research arm of credit ratings agency Fitch said this week that Vietnam’s low tariff collection due to its open trade policy and the slow progress of state-owned enterprises (SOE) divestment would put downward pressure on revenue collection in 2019.

State divestment from SOEs remained behind schedule, with only 30 approved for privatization in the first five months of 2019 out of a total of 127 the government had targeted by 2020.

The country's continued pursuit of trade liberalization would weigh on tariff revenue growth, even while its import growth would continue to be supported in the coming quarters by the country's resilient economic outlook particularly amid the ongoing U.S.-China trade dispute.

Vietnam had been actively pursuing an open-door trade policy, with 11 free trade agreements in effect and another 13 in the negotiation or consultative study stage.

The elimination of most tariffs lines under these agreements implied that while import growth was likely to see significant upside, it was unlikely to translate into tariff revenue growth.

The country's fiscal deficit was estimated at 5.9 percent last year and in the first quarter of 2019.

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