Economic Update: A Snapshot of Vietnam’s Macroeconomic Situation

When you’re dedicated to poverty reduction and community development, it’s important to keep up with the latest economic headlines. Economics, poverty, and development often go hand-in-hand, whether it’s through creating stable employment or through sculpting an ecosystem that gives budding entrepreneurs a chance to start their own enterprises. The relationship between the three isn’t always simple, but they’re all highly dependent on one another.

On Wednesday, the World Bank released a new report that helps us better understand Vietnam’s current macroeconomic situation with hints about how it might affect poverty and development. The good news: Vietnam’s economy is projected to grow by 5.7% in 2012, the macro environment is stabilizing and exports are growing. Labor intensive manufacturing industries (like garment, footwear, and furniture) are also growing–typically considered a good thing for developing countries trying to pull their populations out of poverty. It means there will be more jobs that don’t require as much training or education that people of less means can take on. Inflation has also improved: from a 23% crest in August 2011, it was down to 10.5% last month. That’s still an incredibly high, but high inflation is common for emerging economies, and it’s definitely an improvement from 23%.

With every article and announcement extolling Vietnam’s booming economy, however, there’s another report pointing out that Vietnam’s growth is already declining. So this report contained both. In addition to the good news, there was also signs of a slow down in progress. The 5.7% forecast is already lower than 5.9% growth of 2011 and 6.8% growth of 2010. The first quarter of 2012 only indicated a 4% growth rate. Add that to a dampening in investment and a decrease in private consumption and Vietnam’s economy doesn’t look quite as rosy as it might’ve a few quarters back.

From VNHELP’s organizational standpoint, some of the more disconcerting revelations are the rise in fuel prices and food price inflation. Fuel prices increased in March, pulling transportation costs up with it. Meanwhile, food price inflation stood at 17.8% in March–a drop from the staggering 34.1% of August 2011, but still a hefty increase. Fuel and food prices are particularly points of interest for organizations involved in helping impoverished communities. Food is, of course, an essential of life, and we don’t want to see people going hungry for lack of money. Fuel prices can consume a large portion of a household’s budget, and having to allocate more for fuel/transportation can end up diverting family resources from education, entrepreneurship or health.

While we can still be optimistic for Vietnam’s economic future (and cross our fingers that the growth is equitable), the message seems to come down to that age-old aphorism: proceed with caution.

Update: Some more good news–Josh Noble and Stefan Wagstyle of the Financial Times report that inflation has actually fallen to 8.5% in May. They write that “prices have now been flat month-on-month for two months in a row.” It’s the first time that inflation has fallen below double digits in a year. However, the stabilizing in prices also comes with some more tempered news. Demand is slowing.

Image by mr.Wood via Flickr (Creative Commons)

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About VNHELP

VNHELP is nonprofit that provides humanitarian and development assistance to Vietnam. We focus on individual and community building by tackling the key education and health needs of Vietnam's poor. We work towards a future where all individuals, regardless of background or standing in life, can achieve self-sufficiency, self-determination, and self-confidence.
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