The global economy is showing signs of recovery, but at an uneven pace; global growth is expected to rise modestly to 2.6 percent in 2014, and an average 3.3 percent in 201517.
... 更多显示 The gradual strengthening of activity in the Euro Area and especially the US will boost demand for exports from developing East Asia and Pacific (EAP), helping the region sustain its growth performance. There are early signs of firming up of economic recovery in Vietnam. GDP growth picked up to a relatively brisk 6.2 percent (y-o-y) in the third quarter of 2014, contributing to an overall growth rate of 5.6 percent for the first nine months of the year. Credit growth continues to come in below target, hampering the State Bank of Vietnamapos;s efforts to carry out credit expansion to support economic growth. The Government has taken some important measures in 2014 to improve business conditions, which are expected to bear fruit from 2015 onward. The Government issued Resolution 19 (March 18, 2014), which prioritizes shortening the time for processing and completion of administrative procedures, reducing administrative costs, and strengthening transparency and accountability of state administrative agencies. The Financial Sector Assessment Program (FSAP) provides a comprehensive framework to identify financial system vulnerabilities and develop appropriate policy responses. Recognizing its importance, in July 2012 the Government of Vietnam invited the World Bank and the IMF to initiate an FSAP for Vietnam. In recent years the Vietnamese economy had shown signs of corporate and financial distress, and slowdown in GDP growth. In response to this, the government announced a comprehensive reform program designed to address the problems faced by the financial and corporate sectors. The FSAP provides a broad set of policy recommendations that can be used to operationalize the SEDP and the banking restructuring program. The recommendations include recapitalization plans, the workout of NPLs, regulatory and other reforms, and the temporary extension of the safety net.
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The global economy is showing signs of recovery, but at an uneven pace; global growth is expected to rise modestly to 2.6 percent in 2014, and an average 3.3 percent in 201517.
... 更多显示 The gradual strengthening of activity in the Euro Area and especially the US will boost demand for exports from developing East Asia and Pacific (EAP), helping the region sustain its growth performance. There are early signs of firming up of economic recovery in Vietnam. GDP growth picked up to a relatively brisk 6.2 percent (y-o-y) in the third quarter of 2014, contributing to an overall growth rate of 5.6 percent for the first nine months of the year. Credit growth continues to come in below target, hampering the State Bank of Vietnamapos;s efforts to carry out credit expansion to support economic growth. The Government has taken some important measures in 2014 to improve business conditions, which are expected to bear fruit from 2015 onward. The Government issued Resolution 19 (March 18, 2014), which prioritizes shortening the time for processing and completion of administrative procedures, reducing administrative costs, and strengthening transparency and accountability of state administrative agencies. The Financial Sector Assessment Program (FSAP) provides a comprehensive framework to identify financial system vulnerabilities and develop appropriate policy responses. Recognizing its importance, in July 2012 the Government of Vietnam invited the World Bank and the IMF to initiate an FSAP for Vietnam. In recent years the Vietnamese economy had shown signs of corporate and financial distress, and slowdown in GDP growth. In response to this, the government announced a comprehensive reform program designed to address the problems faced by the financial and corporate sectors. The FSAP provides a broad set of policy recommendations that can be used to operationalize the SEDP and the banking restructuring program. The recommendations include recapitalization plans, the workout of NPLs, regulatory and other reforms, and the temporary extension of the safety net.
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This issue of the East Asia and Pacific economic update is based on data available through September 29, inclusive. This report also includes a special section, focusing on two crucial medium-term issues facing developing East Asia and Pacific: education and skills development, and international migration; and an overview of the economic prospects and policy priorities for the Pacific Island Countries.
... 更多显示 Overall, the global economy is showing signs of recovery, but at an uneven pace; global growth is expected to rise modestly to 2.6 percent in 2014, and an average 3.3 percent in from 2015 to 2017. The gradual strengthening of activity in high-income economies will boost demand for exports from developing East Asia and Pacific, helping the region sustain its growth performance. In China growth will gradually moderate to 7.4 percent in 2014 and 7.1 percent in 2016, reflecting intensified policy efforts to address financial vulnerabilities and structural constraints, and place the economy on a more sustainable growth path. In the rest of the region, growth will gradually pick up, as exports firm and the impact of domestic adjustment in the large ASEAN countries eases. Investment in the large ASEAN economies weakened, while private consumption remained resilient. Fiscal policy in many countries has aimed at rebuilding fiscal space but these efforts need to be sustained. Credit growth has slowed reflecting tighter policies and inflation generally remains low. Significant uncertainties remain about the strength and sustainability of the recovery in high-income economies, as well as about the timing of policy actions by central banks in these countries. In this uncertain global environment, there is still a window of opportunity to enact critical, and in some cases overdue,reforms; the short-term priority in several countries is to address the vulnerabilities and inefficiencies that have been created by an extended period of loose financial conditions and fiscal stimulus. In China the authorities need to strike a balance between containing the growing risks from rising leverage and meeting the indicative growth targets. Over the longer term, the focus in most countries must be on implementing the structural reforms needed to enhance their export competitiveness.
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Macroeconomic stability in Vietnam is improving, underpinned by moderating inflation and strengthening external accounts. Headline Consumer Price Index (CPI) inflation has stabilized, aided by subdued credit growth and easing of food price increases.
... 更多显示 The decline in core inflation has been more gradual. Pressure on the Vietnamese currency has also eased substantially. A sustained recovery in Gross Domestic Product (GDP) growth remains hampered however by slow-moving structural reforms and global uncertainty. With rising pressures on the budget, the government is faced with some crucial fiscal policy choices, as it seeks to balance the objectives of economic expansion and macroeconomic stability. This paper explores crucial issues such as trade facilitation, competitiveness and growth, poverty and inequality, corruption and economic growth in Vietnam, the external economic environment, and recent economic developments in Vietnam.
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Macroeconomic stability in Vietnam is improving, underpinned by moderating inflation and strengthening external accounts. Headline Consumer Price Index (CPI) inflation has stabilized, aided by subdued credit growth and easing of food price increases.
... 更多显示 The decline in core inflation has been more gradual. Pressure on the Vietnamese currency has also eased substantially. A sustained recovery in Gross Domestic Product (GDP) growth remains hampered however by slow-moving structural reforms and global uncertainty. With rising pressures on the budget, the government is faced with some crucial fiscal policy choices, as it seeks to balance the objectives of economic expansion and macroeconomic stability. This paper explores crucial issues such as trade facilitation, competitiveness and growth, poverty and inequality, corruption and economic growth in Vietnam, the external economic environment, and recent economic developments in Vietnam.
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This paper includes three parts: external economic environment, part one includes: global environment, regional environment, and risks. Vietnamapos;s recent economic development, part two includes: a relatively stable macroeconomic situation, growth at record low, booming exports despite a slowing economy, sharp turnaround in external accounts, inflation dynamics, monetary policy, fiscal policy, and near-term outlook.
... 更多显示 Structural reforms and medium-term outlook, part three includes: context, restructuring of state-owned enterprises, banking Sector development, and poverty reduction.
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This paper includes three parts: external economic environment, part one includes: global environment, regional environment, and risks. Vietnamapos;s recent economic development, part two includes: a relatively stable macroeconomic situation, growth at record low, booming exports despite a slowing economy, sharp turnaround in external accounts, inflation dynamics, monetary policy, fiscal policy, and near-term outlook.
... 更多显示 Structural reforms and medium-term outlook, part three includes: context, restructuring of state-owned enterprises, banking Sector development, and poverty reduction.
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Prospects for the global economy have become less certain in the second half of 2011, with significant increase in downside risks. Developing countries in East Asia are growing faster than developed countries, but they too are facing challenges due to a combination of reasons including: slower expansion in demand in developed countries; the impact of global uncertainty on investor sentiments; natural disasters; and the withdrawal of stimulus policies.
... 更多显示 Vietnamapos;s growth slowed in 2011 compared to 2010, though it is still expected to reach around 5.8 percent. The external sector has remained relatively stable. The current account deficit declined in 2011, as export performance outpaced imports and remittances grew robustly. Both import and export values saw a dramatic rise, mostly because of higher commodities prices. External debt remains sustainable, as the current account deficit was more than covered through medium-term capital inflows that are largely non debt-creating (foreign direct investments) or contracted on concessional terms (official development aid). Foreign direct investment inflows continued at a steady pace, although new commitments declined. International reserves increased in the first half of the year while the Vietnamese dong benefitted from a period of relative calm. In the last quarter of the year, however, exchange rate fluctuations increased due to volatility in gold prices, deepening uncertainties and the seasonal increase in demand for foreign currency as the year end approaches. In the longer run, Vietnamapos;s ambition to maintain high growth into the next decade will require as bold a set of reforms as the one adopted with Doi Moi. The challenge is arguably more difficult than the previous one, and few countries in the world have accomplished it. Vietnam is endowed with a young and hard-working labor force. This is a vital asset to meet the countryapos;s ambitious goals, if the country manages to equip itself with relevant skills, and match it with necessary capital. It also needs a level-playing field to maximize its potential. As people become more educated and production becomes more sophisticated, demands for predictability, trust and a level playing field will grow. Transparency is a critical element in this. Concentration of economic power in a small number of large firms undermines efforts at creating a level playing field. Large firms and industries that circumvent rules to their advantage are promoting corruption, and undermining efficiency, which damages the countryapos;s potential. The governance challenges are complex, but Vietnamapos;s medium term outlook will be much better if they are addressed sooner rather than later.
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Prospects for the global economy have become less certain in the second half of 2011, with significant increase in downside risks. Developing countries in East Asia are growing faster than developed countries, but they too are facing challenges due to a combination of reasons including: slower expansion in demand in developed countries; the impact of global uncertainty on investor sentiments; natural disasters; and the withdrawal of stimulus policies.
... 更多显示 Vietnamapos;s growth slowed in 2011 compared to 2010, though it is still expected to reach around 5.8 percent. The external sector has remained relatively stable. The current account deficit declined in 2011, as export performance outpaced imports and remittances grew robustly. Both import and export values saw a dramatic rise, mostly because of higher commodities prices. External debt remains sustainable, as the current account deficit was more than covered through medium-term capital inflows that are largely non debt-creating (foreign direct investments) or contracted on concessional terms (official development aid). Foreign direct investment inflows continued at a steady pace, although new commitments declined. International reserves increased in the first half of the year while the Vietnamese dong benefitted from a period of relative calm. In the last quarter of the year, however, exchange rate fluctuations increased due to volatility in gold prices, deepening uncertainties and the seasonal increase in demand for foreign currency as the year end approaches. In the longer run, Vietnamapos;s ambition to maintain high growth into the next decade will require as bold a set of reforms as the one adopted with Doi Moi. The challenge is arguably more difficult than the previous one, and few countries in the world have accomplished it. Vietnam is endowed with a young and hard-working labor force. This is a vital asset to meet the countryapos;s ambitious goals, if the country manages to equip itself with relevant skills, and match it with necessary capital. It also needs a level-playing field to maximize its potential. As people become more educated and production becomes more sophisticated, demands for predictability, trust and a level playing field will grow. Transparency is a critical element in this. Concentration of economic power in a small number of large firms undermines efforts at creating a level playing field. Large firms and industries that circumvent rules to their advantage are promoting corruption, and undermining efficiency, which damages the countryapos;s potential. The governance challenges are complex, but Vietnamapos;s medium term outlook will be much better if they are addressed sooner rather than later.
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In the last few years, Vietnamapos;s macroeconomic situation has followed a predictable pattern. When faced with external shocks the authorities have opted to protect the countryapos;s rapid growth rate, even if it meant tolerating higher levels of macroeconomic instability.
... 更多显示 This has meant modest growth slowdowns and frequent episodes of overheating. So when the economy started to overheat in late 2010 following the delayed withdrawal of the fiscal and monetary stimulus put in place in 2009, few expected a determined response from the government to stem the ensuing macroeconomic volatility. The current episode of macroeconomic instability has been as severe as the previous overheating episode of mid-2008. The author constructed a summary measure of macroeconomic instability, Vietnam Index of Macroeconomic Stability (VIMS), based on the movement of four variables, namely nominal exchange rate, international reserves, inflation rate and nominal interest rate. Our measure shows that the degree of macroeconomic instability during the current episode did come quite close to mid-2008, but has not surpassed it yet. But unlike 2008, when the level of instability increased sharply and fell immediately, instability has persisted over a longer period of time during the current episode, from November 2010 to February 2011, exposing Vietnamapos;s economy to a prolonged period of nervousness and uncertainty.
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In the last few years, Vietnamapos;s macroeconomic situation has followed a predictable pattern. When faced with external shocks the authorities have opted to protect the countryapos;s rapid growth rate, even if it meant tolerating higher levels of macroeconomic instability.
... 更多显示 This has meant modest growth slowdowns and frequent episodes of overheating. So when the economy started to overheat in late 2010 following the delayed withdrawal of the fiscal and monetary stimulus put in place in 2009, few expected a determined response from the government to stem the ensuing macroeconomic volatility. The current episode of macroeconomic instability has been as severe as the previous overheating episode of mid-2008. The author constructed a summary measure of macroeconomic instability, Vietnam Index of Macroeconomic Stability (VIMS), based on the movement of four variables, namely nominal exchange rate, international reserves, inflation rate and nominal interest rate. Our measure shows that the degree of macroeconomic instability during the current episode did come quite close to mid-2008, but has not surpassed it yet. But unlike 2008, when the level of instability increased sharply and fell immediately, instability has persisted over a longer period of time during the current episode, from November 2010 to February 2011, exposing Vietnamapos;s economy to a prolonged period of nervousness and uncertainty.
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In the post-global economic crisis environment, Vietnamapos;s economy continues to grow at a reasonably rapid and stable rate. While the speed of global economic recovery has been uneven across the world, Asia as a region has done particularly well.
... 更多显示 And within Asia, Vietnamapos;s growth performance continues to be impressive. As shown in left panel of, Vietnam was one of the fastest growing economies in the East Asia and Pacific (EAP) region prior to the global economic crisis and has remained so in the post-crisis period as well1. After registering a real gross domestic product (GDP) growth of 5.3 percent in 2009, Vietnamapos;s economy is expected to grow between 6.5-6.7 percent in 2010. Vietnam, like China, stands out not only for achieving a higher average growth rate but also a more stable growth path. This however has meant that the speed with which the Vietnamapos;s economy is bouncing back from the lows of 2009 appears to be less impressive than countries that experienced negative growth last year. This edition of apos;Taking Stockapos; a semi-annual publication from the World Bank attempts to understand the recent macroeconomic changes in Vietnam. It documents changes to the macroeconomic outcomes and policies with a view to inform policy discussions in the country. The analysis is mostly retrospective in nature, though discussions on prospective challenges and outlook are also briefly mentioned. Developments in the global economy in general and in the EAP region in particular are juxtaposed against Vietnamapos;s own economic outcomes and policies to provide a more complete and nuanced picture of the issues.
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In the post-global economic crisis environment, Vietnamapos;s economy continues to grow at a reasonably rapid and stable rate. While the speed of global economic recovery has been uneven across the world, Asia as a region has done particularly well.
... 更多显示 And within Asia, Vietnamapos;s growth performance continues to be impressive. As shown in left panel of, Vietnam was one of the fastest growing economies in the East Asia and Pacific (EAP) region prior to the global economic crisis and has remained so in the post-crisis period as well1. After registering a real gross domestic product (GDP) growth of 5.3 percent in 2009, Vietnamapos;s economy is expected to grow between 6.5-6.7 percent in 2010. Vietnam, like China, stands out not only for achieving a higher average growth rate but also a more stable growth path. This however has meant that the speed with which the Vietnamapos;s economy is bouncing back from the lows of 2009 appears to be less impressive than countries that experienced negative growth last year. This edition of apos;Taking Stockapos; a semi-annual publication from the World Bank attempts to understand the recent macroeconomic changes in Vietnam. It documents changes to the macroeconomic outcomes and policies with a view to inform policy discussions in the country. The analysis is mostly retrospective in nature, though discussions on prospective challenges and outlook are also briefly mentioned. Developments in the global economy in general and in the EAP region in particular are juxtaposed against Vietnamapos;s own economic outcomes and policies to provide a more complete and nuanced picture of the issues.
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Vietnam has navigated the global crisis better than many other countries. GDP grew by 5.3 percent in 2009, accelerating to 6.9 percent in the last quarter of the year.
... 更多显示 At 5.8 percent, the figure for the first quarter of 2010 was less impressive, but claims that growth has slowed down are most probably unwarranted. Exports declined in 2009, for the first time since the beginning of economic reforms, but their decline was smaller than in other countries of the region. By now export growth is converging back to the 30 percent annual growth rate observed before the crisis. Inflation, which had reached 19.9 percent in 2008, was down to 6.5 percent in 2009. While there were some worrying signs of inflation acceleration in late 2009 and early 2010, by now the monthly increase of the Consumer Price Index (CPI) is again moderate. And as in previous years, there were no banking crises despite the continuation of macroeconomic turbulence. More generally, lack of clarity by markets forces the government to overshoot in its policy reactions. Because markets are not sure to understand what the government is up to, they need to see very strong action in order to be convinced that the right course of action has been taken. As a result, Vietnam has had to go through dramatic shifts in the policy stance as circumstances changed. The stabilization policies of 2008 effectively apos;killedapos; the real estate bubble and brought inflation rates to zero in just a few months, but such speed took a toll on economic activity. The stimulus policies of 2009 were equally strong and determined, but they ended up putting too much pressure on international reserves. With more information disclosure and better communication, policy shifts could perhaps be less extreme. Combined with stronger macroeconomic management, it should be possible for Vietnam to gradually free itself from the apos;stop-and-goapos; cycle that has characterized macroeconomic policies over the last three years.
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In late 2007 and early 2008, Vietnam was confronted with the economic overheating resulting from massive capital inflows. Attempts to sterilize these inflows were not able to prevent a boom in banking credit, an acceleration of inflation, a ballooning trade deficit and asset price bubbles.
... 更多显示 A determined reaction by the government from March 2008 onwards succeeded in stabilizing the economy and reducing the trade deficit to manageable levels. In the second half of 2008, the financial crisis originating in the United States affected foreign demand. The international prices of commodities exported by Vietnam were on a declining trend since the third quarter, export orders for garments and other industrial products collapsed in the fourth quarter, and a slowdown in manufacturing became noticeable. The government reacted swiftly to this second economic shock, shifting gear from stabilization to supporting economic activity in November 2008. Subsequent stimulus measures prevented a collapse of economic activity and might have put the economy on a recovery track. The economic developments of early 2009 also confirmed the resilience of the Vietnamese economy. While workers and households have undoubtedly suffered, macroeconomic performance was better than in many other countries, in the region and elsewhere. This performance owes to the stimulus policies adopted by the government, but it also reflects solid initial conditions. The demographic transition is rapidly expanding the working age population, and new entrants into the labor force tend to be more skilled than the average worker.
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In late 2007 and early 2008, Vietnam was confronted with the economic overheating resulting from massive capital inflows. Attempts to sterilize these inflows were not able to prevent a boom in banking credit, an acceleration of inflation, a ballooning trade deficit and asset price bubbles.
... 更多显示 A determined reaction by the government from March 2008 onwards succeeded in stabilizing the economy and reducing the trade deficit to manageable levels. In the second half of 2008, the financial crisis originating in the United States affected foreign demand. The international prices of commodities exported by Vietnam were on a declining trend since the third quarter, export orders for garments and other industrial products collapsed in the fourth quarter, and a slowdown in manufacturing became noticeable. The government reacted swiftly to this second economic shock, shifting gear from stabilization to supporting economic activity in November 2008. Subsequent stimulus measures prevented a collapse of economic activity and might have put the economy on a recovery track. The economic developments of early 2009 also confirmed the resilience of the Vietnamese economy. While workers and households have undoubtedly suffered, macroeconomic performance was better than in many other countries, in the region and elsewhere. This performance owes to the stimulus policies adopted by the government, but it also reflects solid initial conditions. The demographic transition is rapidly expanding the working age population, and new entrants into the labor force tend to be more skilled than the average worker.
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Over most of the last decade a steady expansion of international trade, growing capital flows to developing countries and moderate world inflation had made macroeconomic management relatively easy for the government of Vietnam.
... 更多显示 The domestic policy debate was mostly focused on microeconomic issues: how to complete the transition from plan to market, how to reform the state sector, and how to lay down the institutional foundations to become an industrial country in one generation. The end of the year 2007 marked an end to that tranquil setting. Since then, the Vietnamese economy has faced a global rollercoaster, including massive capital inflows in late 2007 and a collapse in the demand for exports in late 2008. These past two years have tested the macroeconomic management capacity of the government. In early 2008, only half a year after the first signs of overheating were visible, the government shifted its priorities decisively, from growth to stabilization, effectively ending the real estate bubble and bringing the inflation rate down in a matter of months. In late 2009, when some analysts still claimed that inflation could be running out of control, the government swiftly shifted its priorities once again, from stabilizing the economy to sustaining growth. By late 2009 the Vietnamese economy is among the fastest growing in the world. However, due to their sheer magnitude the stimulus policies also put pressure on the balance of payments and especially on the markets for foreign exchange and gold. In late 2009, while going through the second anniversary of macroeconomic turbulence in Vietnam, it is reassuring to see that the government is rebalancing its objectives once again, giving more priority to stability.
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Over most of the last decade a steady expansion of international trade, growing capital flows to developing countries and moderate world inflation had made macroeconomic management relatively easy for the government of Vietnam.
... 更多显示 The domestic policy debate was mostly focused on microeconomic issues: how to complete the transition from plan to market, how to reform the state sector, and how to lay down the institutional foundations to become an industrial country in one generation. The end of the year 2007 marked an end to that tranquil setting. Since then, the Vietnamese economy has faced a global rollercoaster, including massive capital inflows in late 2007 and a collapse in the demand for exports in late 2008. These past two years have tested the macroeconomic management capacity of the government. In early 2008, only half a year after the first signs of overheating were visible, the government shifted its priorities decisively, from growth to stabilization, effectively ending the real estate bubble and bringing the inflation rate down in a matter of months. In late 2009, when some analysts still claimed that inflation could be running out of control, the government swiftly shifted its priorities once again, from stabilizing the economy to sustaining growth. By late 2009 the Vietnamese economy is among the fastest growing in the world. However, due to their sheer magnitude the stimulus policies also put pressure on the balance of payments and especially on the markets for foreign exchange and gold. In late 2009, while going through the second anniversary of macroeconomic turbulence in Vietnam, it is reassuring to see that the government is rebalancing its objectives once again, giving more priority to stability.
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During the first part of the year, Vietnam was confronted with the overheating created by massive capital inflows, resulting in accelerating inflation, a ballooning trade deficit, a real estate bubble and many investments of dubious quality.
... 更多显示 A determined reaction by the government, especially since March 2008, was successful at stabilizing the economy. In spite of surging world prices of food and oil, a tight monetary policy and some measure of fiscal restrain burst the real estate bubble, gradually brought down the inflation rate and reduced the trade deficit to manageable levels. In the process, economic activity was also affected, with the first half of 2008 seeing the worst growth performance in years. The overall economic situation was fragile around May, when markets were nervous about a possible balance of payment crisis, but it gradually became apparent that the stabilization package was working. With still booming approvals for Foreign Direct Investment (FDI) projects, Vietnam seemed ready to renew with rapid economic growth. That was when the second crisis hit. In the second half of 2008, financial difficulties in a risky segment of the mortgage market in the United States developed into a global financial crisis of unprecedented proportions. Fear paralyzed activity in industrial countries, bringing credit to a halt and even threatening to derail international trade. Economic forecasts for industrial countries in 2009 are revised often, and the adjustment is always downwards. How much this global turmoil will affect Vietnam is still unclear. Its banking sector has not been directly affected, because its does not hold the financial products at the center of the current crisis, and is only marginally owned by international banks which could be exposed to such products. But the growth of Vietnamese exports is bound to slow down, approvals of new FDI projects will decrease dramatically, and even FDI disbursements on already approved projects may dwindle. Together with the fallout from the burst of the real estate bubble, this will create difficulties for many enterprises, resulting in a higher proportion of non-performing loans (NPLs) and affecting the banking sector indirectly. The rapid rate at which poverty had been falling in Vietnam will also be reduced. An effort to support economic growth amidst the global turbulence needs to be accompanied by determined reforms, so that it does not lead to the asset price bubbles and dubious investments of the first part of the year.
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During the first part of the year, Vietnam was confronted with the overheating created by massive capital inflows, resulting in accelerating inflation, a ballooning trade deficit, a real estate bubble and many investments of dubious quality.
... 更多显示 A determined reaction by the government, especially since March 2008, was successful at stabilizing the economy. In spite of surging world prices of food and oil, a tight monetary policy and some measure of fiscal restrain burst the real estate bubble, gradually brought down the inflation rate and reduced the trade deficit to manageable levels. In the process, economic activity was also affected, with the first half of 2008 seeing the worst growth performance in years. The overall economic situation was fragile around May, when markets were nervous about a possible balance of payment crisis, but it gradually became apparent that the stabilization package was working. With still booming approvals for Foreign Direct Investment (FDI) projects, Vietnam seemed ready to renew with rapid economic growth. That was when the second crisis hit. In the second half of 2008, financial difficulties in a risky segment of the mortgage market in the United States developed into a global financial crisis of unprecedented proportions. Fear paralyzed activity in industrial countries, bringing credit to a halt and even threatening to derail international trade. Economic forecasts for industrial countries in 2009 are revised often, and the adjustment is always downwards. How much this global turmoil will affect Vietnam is still unclear. Its banking sector has not been directly affected, because its does not hold the financial products at the center of the current crisis, and is only marginally owned by international banks which could be exposed to such products. But the growth of Vietnamese exports is bound to slow down, approvals of new FDI projects will decrease dramatically, and even FDI disbursements on already approved projects may dwindle. Together with the fallout from the burst of the real estate bubble, this will create difficulties for many enterprises, resulting in a higher proportion of non-performing loans (NPLs) and affecting the banking sector indirectly. The rapid rate at which poverty had been falling in Vietnam will also be reduced. An effort to support economic growth amidst the global turbulence needs to be accompanied by determined reforms, so that it does not lead to the asset price bubbles and dubious investments of the first part of the year.
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