Vietnam has been among the most successful East Asian economies since ‘Doi Moi’ reforms began in 1986. Economic growth surpassed 9 per cent per year just prior to the Asian financial crisis in 1997-98, and exceeded 8 per cent per year before the great recession and financial crisis in 2008-2009.
Vietnam weathered those crises better than most of its neighbors. GDP growth slowed less and quickly recovered to rates near those experienced before those crises.
Figures show that GDP growth rates for selected East Asian countries from 1995 until 2008, with the IMF’s recent estimates and forecasts of expected growth to 2011 included to illustrate the robust recovery expected in this region.
They also show Vietnam’s growth rate which was on average above most other countries, except China, but with somewhat less catch-up growth following each of the two ‘globalization crises’.
Post reform economic growth in Vietnam had been accompanied by trade liberalization reforms that then led to an explosion in international trade. Exports as a share of GDP grew from 26.4 percent in 1990 to 77.9 percent in 2008, while imports grew from 35.7 percent to 93.1 percent over that same period.
This evidence led many to argue that Vietnam is an excellent example of export led growth. Yet, if that were the case, one would expect that Vietnam was especially vulnerable to the recent economic crisis. One key feature the great recession and the financial crisis of 2008-09 was an unprecedented collapse in global trade, especially short term trade data assembled by the IMF.
This paper explores in more depth the changes in the Vietnamese economy before, during, and after the two recent globalization crises. The aim of the paper is to:
assess Vietnamese economic performance and policy responses during and after the two recent globalization crises
highlight the importance of investment over trade in determining the evolution of the economy
examine how tradeoffs between growth, financing and stabilization have been made
draw lessons for future macroeconomic policy
Results of the study show the following:
declines in investment around globalization crises were smaller than in either exports or imports, and more in line with the small changes in observed GDP growth rates
Vietnam’s policy interventions have sustained economic growth rates at nearly pre-crisis levels
the current account deficit in pre crisis periods reflects the attractiveness of Vietnam as a destination for foreign direct investment