The presentation slides provide a superficial glimpse of the economics of Vietnam. Please do conduct your own study too. This can only be used a reference and not all the information maybe correct

1. Presented by:
Mr. Asim Kulkarni

2.  1858- French colonial rule begins
 1930- Ho Chi Minh establishes Indochinese Communist Party(ICP)
 1945- Ho Chi Minh announces independence with help of Viet Minh forces.
 1950/54- Democratic Republic of Vietnam is recognised by USSR and China. Vietnam is split into
North and South Vietnam at Geneva conference.
 1957- Communist insurgency (Viet Cong)in South Vietnam
 1963- U.S. enters Vietnam War(war between north and south Vietnam)
 1964- U.S. congress pass Gulf of Tonkin resolution, USSR and China send engineers, food,
ammunition, artillery, aircraft to aid Viet Cong & Viet Minh
 1969- Ho Chi Minh dies. President Nixon reduces U.S. troops
 1970/73- Paris talks. Ceasefire agreement in Paris. U.S. pull out troops completely
 1975- North invades South and Vietnam is unified.

3.  The long war in Vietnam completely ravaged the country; the physical as well as the economic
infrastructure, was in ruins. And there was no respite for the nation, even after the war.
Sanction after sanction were slapped on Vietnam, which greatly hindered the rebuilding
efforts.
 With Doi Moi (renovation) Economic Reforms, in 1986 the government of Vietnam hoped to
move forward with socialist-oriented market economy.
 In the early years of Doi Moi the I.M.F. provided financial support to implement the reforms.
 Reduction of sanctions, U.S. lifted trade embargo in 1994 encouraged foreign investments and
trade. Vietnam became largest exporter of rice.
 Now, Vietnam has the fastest growing economy in Asia and the Vietnamese Dong has
stabilized in the foreign market.

6. • The recent Fiscal policy consolidation by the Vietnamese government will result in an increase
of US$155 compared to 2017 and US$325 in 2016, which is, however, remains a long way off
achieving the target of US$3,200 - 3,500 by 2020.
• The first nine months of 2018, Vietnam has over 96,610 newly established enterprises, while
73,100 ones ceased operation during the period, up 48% year-on-year.
• The government sets target of improving the business and investment environment
substantially and preventing new business conditions.
• It could affect Vietnam's economy, including an increase in oil prices, the volatility of the
USD/VND exchange rate and the US - China trade friction.

8.  Recent developments in labour force is attributed following reasons:
 The growth in population between 1997 and 2007 has added a large number of labours Vietnam labour
market.
 Strong growth in GDP along with employment gains and improved labour productivity, reduction in
poverty
 Downward trend in labour force participation due to youth remaining in school longer and adults taking
earlier retirement.
 Majority of the labour force falls into the category of being vulnerable and lack to have a decent work.
 Shifts in labour market due to decreasing proportion in agricultural employment, and rising employment
in the industrial and services sectors.
 Unemployment isn’t a problem in the country with a stable unemployment rate.
 While Vietnam still remains a large population in rural area, it is gradually shifting major number of
residents from rural area to urban area.

9.  Unemployment Rate =
Unemployed Workers
Total Labor Force
 As of 2018 the average unemployment rate is 2.1%.

10.  Frictional unemployment
 New graduate and migrant workers look for high-salary jobs.
 Cylical unemployment
 2008 crisis- 2 million people lost jobs
 Seasonal Jobs- agriculture
 Structural unemployment
 Labour being replaced by machines
 Teachers being replaced by Audio-Visual educators
 Lack of income leads to slowdown in economic development and reduction in foreign investments.
It increases health problems, violence and crime.

13.  In 1993, 60% of population lived in poverty. By 2014, the number had changed to 14%. 40 million
people lifted out of poverty.
 The annual inflation rate in Vietnam went down to an eight-month low of 2.98 percent in
December 2018 from 3.46 percent in the previous month.
 Prices eased for food (2.01 percent vs 2.41 percent in November); housing and construction
materials (1.14 percent vs 2.28 percent), and transport (0.21 percent vs 6.24 percent). On the
other hand, inflation was steady for garment, footwear, hat (at 1.68 percent) while cost of
household appliances and goods rose faster (1.36 percent vs 1.32 percent).
 Annual core inflation, which excludes volatile items, inched down to 1.70 percent from 1.72
percent in November. On a monthly basis, consumer prices went down 0.25 percent, following a
0.29 percent fall in November.
 Considering the 2018 as a whole, inflation rate was at 3.54 percent. Inflation Rate in Vietnam
averaged 6.37 percent from 1996 until 2018, reaching an all time high of 28.24 percent in August
of 2008 and a record low of -2.60 percent in July of 2000.

14.  In Vietnam, the most important categories in the consumer price index are food and
food and drink services (36.12 percent of total weight), housing and construction
materials (15.73 percent), transport (9.37 percent), household appliances (7.1 percent)
and clothing and footwear (6.37 percent).
 The index also includes: education (6 percent), health (5 percent), culture,
entertainment and tourism (4.29 percent), beverages and tobacco (3.59 percent),
miscellaneous goods and services (3.3 percent) and posts and telecoms (2.89 percent).

15.  Vietnam hasn’t focused much on the Monetary Policy. Being a developing nation, Vietnam has
managed to out perform other developed nations of the world.
 Vietnam focuses more on its Fiscal Policies rather than Monetary Policies.
 Monetary Policies are drafted by the State Bank of Vietnam (SBV) in collaboration with the
Vietnamese government and the International Monetary Fund (IMF).
 In 2018, The State Bank of Vietnam’s (SBV) net purchase of foreign currencies exceeded 11
billion USD in the first half, increasing the nation’s foreign exchange reserves to approximately
63.5 billion USD.
 SBV had carried out a flexible currency policy to stabilize the average interest rate. The average
lending interest rate was reduced by 0.5 percentage points over the January-June period.
 Vietnam followed tightened monetary policy for the year 2018 due to near accurate forecast from
the Economist.

17.  HANOI, October 3, 2017 - The World Bank and the Government of Vietnam today launched a
joint report titled: “Vietnam Public Expenditure Review (PER):Fiscal Policies towards
Sustainability, Efficiency, and Equity”.
 The main purpose of the assessment is to inform fiscal policy decisions and reform action plans
of the Government, particularly in meeting growth, poverty reduction, and global integration
objectives.
 On the basis of a comprehensive analysis of revenue, expenditure and borrowing policies in
Vietnam during the 2011-15 period, the PER identifies state budget revenue and expenditure
trends over the past years, highlights achievements and points to areas for potential
improvement, key fiscal challenges, and strategic directions on fiscal consolidation, and fiscal
policy and governance reforms, in short, medium and long term in Vietnam.

18. • In addition, the rapid pace of expansion, openness and decentralization has made the economy
more complex to manage. The review aims to provide empirical evidence to answer three main
questions:
1. how to create the fiscal space whilst ensuring fiscal sustainability;
2. how to best align public spending with national priorities;
3. how to strengthen accountability for results so that public spending has the greatest impact.
• Being the first joint review in 10 years, the PER comprehensively covers 15 specific chapters,
including 5 cross-cutting topics, 5 heavy-spending sectors (which account for almost 50 percent
of total state budget spending), and 5 provincial chapters; and an Overview that consolidates
key messages across the chapters.
• The report recommends 68 specific policy measures that Vietnam can implement to achieve a
gradual fiscal consolidation while ensuring adequate fiscal space for investment and social
spending; and to improve efficiency of spending through restructuring budget allocations
between central and local government, capital and recurrent spending, and reallocation within
sectors.

19. ” Government and relevant stakeholders including the National Assembly, in further developing its
medium-term development, fiscal and budget plans and priorities. ”said (Ousmane Dione, Country
Director of the World Bank in Vietnam,) “This process of joint review is in many ways as important as the
report itself. Because it is only through our dialogue that analysis and ideas can be transformed into
action, policies and real results. Going forward, it will be important to ensure that the knowledge gained is
spread to a wider audience, through effective dissemination activities starting with today’s launch, and
follow-up engagements be taken on the implementation of the recommendations

20.  Available data suggests the economy remains on solid
footing in the last quarter of 2018 , although GDP
growth is expected to ease from the third quarter’s
strong showing.
 This was mostly thanks to surging new business
inflows and output, and could also be partly due to
companies’ efforts to divert supply chains and
relocate factories from China amid the U.S.-China
trade row. Moreover, tourist arrivals increased at a
rapid pace in November, while retail sales grew
robustly in the same month, boding well for private
consumption.
 On a less positive note, the external sector showed
signs of weakening in Q4, as import growth outpaced
export growth in October and November, with the
latter month posting a trade deficit.

21.  The exchange rate between the U.S. dollar and the Vietnamese dong is set through an
arrangement known as a "crawling peg". Dollar-dong gradually adjust to market change. As of
December 5, 2018, a US dollar is worth 23,256 Vietnamese dong.
 Since Doi Moi in 1986, Vietnam has increased trading.
 In 2012, Vietnam had a trade surplus of US$780 million.
 Total trade reached US$228.13 billion, an increase of 12.1% from 2011.
 In 2013, Vietnam recorded the second year of trade surplus of US$863 million.
 In 2014, Vietnam recorded the third year of trade surplus of US$2.14 billion.
 In 2017, the trade surplus recorded was $2.92 billion.