Property frontiers

Vietnam:
Country Economic Overview

An overview of the vietnamese economy

Sample

An Overview of the Economy

As a result of war, Vietnam's economic development suffered compared with other neighbouring countries. However it is catching up fast. Despite the 1997 Asian economic crisis, Vietnam's economy has expanded rapidly since the Communist Party of Vietnam turned away from the communist economic policies in the 1980s. A sustained growth rate of around 8% for over 15 years shows great progression and is one of many reasons for the increasing number of foreign investors. Vietnam received over US$20 billion of foreign direct investment in 2007, a record amount with an increase of 70% on 2006 figures, and saw almost 1,500 new projects licensed in the same year. Although the economy is developing at a rapid rate, entry costs for investors are still low, and cheap labour costs coupled with a young, literate workforce make business investment a very attractive and lucrative prospect.

The Vietnamese government has shown their commitment to economic liberalization and international integration. Structural reforms needed to modernize the economy have been implemented, helping to produce more competitive, export-driven industries. Vietnam joined the WTO in January 2007. This should give a major boost to Vietnam's export led economy and should spur on the country's economic liberalizing reforms.

However, problems remain. Reform of state enterprises is proceeding slowly, while another big issue is the under-development and poverty level in remote ethnic-minority areas. Although recent statistics show Vietnam in a favourable investment light, it is crucial to also take note of the country's current economic situation. As with any nation witnessing rapid development there has to come a point where the current growth rate is unsustainable, and it seems that Vietnam has reached this juncture. Goldman Sachs predict that the economic growth rate will slow from 8.5% in 2007 to 7.3% in 2008. The government is making strong efforts to curb the growth of inflation and a slowdown in growth is not reason for concern in itself as this is typical cyclical economic behaviour. The real estate market continues to see an influx of foreign investment and there is no immediate reason why this should decrease.

statistics
GDP (PPP) (IMF) (US$Billions)	221.4
GDP (PPP) (CIA) (US$Billions)	221.4
GDP Growth (IMF) (%)	8.5%
GDP Growth (CIA) (%)	8.5%
GDP Per Capita (PPP) (IMF) (US$)	2,586
GDP Per Capita (PPP) (CIA) (US$)	2,600
GDP by Sector (%)	Agriculture: 19.5% Services: 25.5% Industry: 18.9%
Inflation (%)	8.3%
Population Below the Poverty Line (%)	14.8%
Labour Force (Millions)	46.42
Labour Force by Occupation (%)	Agriculture: 55.6% Services: 25.5% Industry: 18.9%
Unemployment (%)	5.3%
Main Industries	Food processing, garments, shoes, machine-building, mining, coal, steel, cement, chemical fertilizer, glass, tyres, oil, paper.

^{Source: CIA World Factbook, IMF}

GDP

Vietnam's GDP growth forecast is predicted to be strong, at an average of 7.9% between 2007 and 2011, according to the Economist Intelligence Unit. although the rate is beginning to fall slightly, year-on-year.

economic indicators	2003	2004	2005	2006	2007
GDP (US$Billions)	39.6	45.5	53.1	61.0	70.0
GDP Growth (%)	7.3%	7.8%	8.4%	8.2%	8.5%
GDP Per Capita (US$)	490	555	637	723	818
GDP Per Capita (PPP) (US$)	1,781	1,949	2,140	2,354	2,587
Inflation (%)	3.2%	7.8%	8.3%	7.5%	8.3%
Unemployment (%)	2%	2.1%	2.1%	2%	5.3%
Mobile Phone Users	730,155	2,742,000	2,472,000	9,593,000	9,593,000
Internet Users	400,000	3,500,000	3,500,000	10,711,000	13,100,000

^{Source: IMF, CIA World Factbook}

Major Exports & Imports

After the dissolution of Comecon in the 1990s, Vietnam was forced to change its trade patterns, which had formerly been dominated by relations with the Soviet Union and its allies. The government liberalized trade and devalued the exchange rate to increase exports. Throughout the 1990s exports expanded significantly, growing by as much as 20%-30% in some years. Vietnam joined the WTO in January 2007. This will be a major boost for Vietnam's export led economy. Major exports include crude oil, textiles, garments and footwear. Major imports in 2006 were machinery, refined petroleum and material for the textiles industry.