Vietnam (official name: the Socialist Republic of Vietnam) is the 8th most populous country in Asia, and the 13th most populous overall. More than a decade of average growth rates of roughly 7% starting in the early 2000s has made Vietnam one of the world’s premier emerging markets, although subsequent economic stumbles have tempered somewhat the early enthusiasm.
Vietnam has proved itself to be a noteworthy economic development success story, although its initial luster has faded somewhat of late. Since its decade of roughly 7% growth rates during the first decade of the 2000s, Vietnam has maintained rates closer to 5% in recent years.
The doi moi program of economic reforms launched in 1986 have significantly opened the Vietnamese economy, and allowed the country to grow from one of the poorest countries in the world to a lower middle income country. In the 15 year period between 1993 and 2008, the ratio of the population living in poverty fell from 58% to 14.5%. Vietnam has made steady progress in meeting the UN Millennium Development Goals, with five of the ten goals already met, and two more well within achievable range.
In 2011, The Eleventh Congress of the Communist Party of Vietnam endorsed a call for a more comprehensive approach to the country’s reform program, including a more proactive embrace of international integration. The primary role of the state in the economy was re-affirmed, however there was also a recognition of the desirability of the importance of market forces and private ownership of assets. The subsequent Communist Party Plenum later in 2011 called for even further economic restructuring, and specifically identified public investment, SOEs, and the financial sector, as priorities for the next five years.
Vietnam’s large population of roughly 90 million – half of which is under the age of thirty – represents one of its greatest economic assets. Vietnam’s youthful population is establishing Vietnam as an increasingly important consumer market, and per capita incomes (and the spending power that brings) crossed the critical US $1,000 level in 2009 – as compared to less than $100 at the launch of the doi moi reforms.
Vietnam’s large population, along with its fairly low wage rates, have allowed it to become highly competitive as a manufacturing hub in a variety of industrial sectors, especially garment manufacturing.
Inflation has been a persistent threat confronting the Vietnamese economy, and in recent years has even approached 20%. For instance, the 2011 inflation rate was roughly 19%, before dropping to a still-high level of approximately 7% in 2012. The government has responded by tightening macroeconomic policy and pursuing other policies to balance its growth objectives with the need for greater price stability. Over the years, the Vietnamese government’s economic policy approach has vacillated between the differing objectives of high growth and manageable inflation. The Vietnamese banking sector struggles to achieve sufficient levels of capitalization, and non-performing loans are thought to be a growing problem, although precise data is not available.
While Vietnam is continuing to gradually shift away from a centrally planned economy, the government still maintains a prominent role and tight controls in many sectors and aspects of economic life. State owned enterprises (SOEs) are still a prominent part of the economic landscape and the state sector accounts for roughly 40% of national GDP.
Vietnam’s economy faces a number of challenges moving forward, including reigning in excessive government “red tape” and bureaucracy, ineffective intellectual rights protection, corruption, unclear labor laws, and the ever present threat of high inflation.