Three falls to move forwards

Pre-đổi mới internal socio-economic crisis

The first crisis arose in late 1970s and lasted from 1982 to early 1990s. It was demonstrated in the four following dimensions:

- Low (or even negative) economic growth: During 1977-1980, the gross domestic products (GDP) only grew 0.4%/year, which was far to meet the preset target of 2.31%. Even in two consecutive years of 1979 and 1980, the GDP dipped by 2% and 1.4% respectively.

- Prolonged galloping inflation: The inflation evolved implicitly since late 1970s to early 1980s as prices dramatically differed between the State’s distribution network and free market. Especially, the inflation index galloped to three digits of 774.7% in 1986.

- Serious payment imbalance: Domestic production capacity only met 80-90% of the local demand, thus goods accumulation was zero. Consequently, the country had to partly depend on foreign aid and credit loans.

- High unemployment rate: The figure surged well over 12.7% of the total working aged force. Due to shrinking production size and quickly-rising population, the GDP per capita was just US $86 - among the lowest group in the world.

Then, thanks to Đổi mới initiated in 1986, Việt Nam escaped from the socio-economic crisis to enter a new era of stability and development. Economic growth within the period of 1992-1997 doubled to the figure in the earlier period of 1977-1991 (8.77%/year against 4.07%/year).

Inflation downsized quickly to 9.5% (1991-1997) from 180.2% (1986-1991). Unemployment rate dropped to one digit (5.88%). Trade imbalance gradually reduced and in 1992, Việt Nam for the first time gained slight excess of export over import. The GDP per capita stood at US $361 in 1997, or 4.2 times higher compared to the 1988 figure.

Việt Nam clicked away from a least developed country to a developing one. As soon as economic sanction was removed, the country kicked off international economic integration and became an ODA recipient.

Surviving Asian financial crisis in late 1990s

As Việt Nam was gaining initial but important fruits of its international economic integration process, the Asian financial crisis started in Thailand with the collapse of Thai baht in 1997 and quickly spread to the Republic of Korea, Indonesia, and others.

Being hurt by the financial crisis, Việt Nam’s economy only grew 5.76% in 1998 after enjoying high growth rates in the period of 1995-1997, and continued spiraling down to 4.77% in 1999. The FDI figure also shrank to US $5.6 billion in 1998 and US $2.6 billion in the following year after it reached the peak of US $10.2 billion in 1996.

Inflation amounted to 9.2% in 1998 after posting at 4.5% and 3.6% in 1996 and 1997 respectively. The price of the greenback rose by 1.2% in 1996, rocketed by 14.2% in 1997 and surged by 9.6% in 1998. Moreover, trade value tumbled down to 1.9% in 1998 after it accelerated by 33.2% in 1996 and 26.6% in 1997.

Việt Nam was not seriously damaged or pulled down by the crisis because the export turnover just accounted for 30% of the GDP and the VND was not transferable. At that time, Việt Nam was already a mega exporter of crude oil and rice. The Government also anticipated and made quick responses to the financial crunch. The national economy was gradually recovering, posting at an average rate of 7.63%/year during the period of 2000-2007.

Việt Nam’s export turnover in 2008 was 5.4 times higher than that of 1999 and accounted for 70% of the GDP. The import value made up 90% of the GDP. These figures were the clear evidences of how open to the world the national economy was.

The Vietnamese economy fully integrated into the world’s economy after Việt Nam became an official member of the World Trade Organization (WTO) in 2007, and signed a number of bilateral trade agreements, including the BTA with the US.

Overcoming global financial crisis and economic downturn

The third crisis stemmed from the US in late 2007 and quickly swept throughout the world. It came at a time when Việt Nam had just joined the WTO.

The country’s economic growth slowed down to 6.31% in 2008 and 5.32% last year. The FDI inflow fell down to US $21.5 billion in 2009 from US $71.7 billion in 2008, meanwhile disbursement also dropped to US $10 billion from US $11.5 billion.

Foreign arrivals, remittance and foreign indirect investment all sharply spiraled down.

Especially, prices climbed up by 12.63% in 2007 and 19,89% in 2008. Trade deficit increased to US $18 billion and US $12.9 billion in 2008 and 2009 respectively.

To address impacts of the global financial crisis and economic downturn on the national economy, the Government adopted a series of measures, bringing about some positive results since mid-2009.

First, the national economy, after spiraling down to 3.1% in Q1/2009, began to rebound in Q2 to 5.32% and 5.83% in Q1 this year. Most noticeably, the recovery can be seen in all sectors.

Second, FDI disbursement reached US $2.5 billion in Q1/2010 and is expected to make a new record this year. The disbursed volume in resonance with the domestic capital was considered the key factors for the country’s economic recovery.

Third, domestic consumption, as seen in the total retail of commodities and service revenue, rose by 14.5%, lending wings to the economic growth.

Fourth, various sectors scored positive changes, particularly tourism, remittance, and ODA.

Fifth, enterprises are now competing for laborers because of the economic recovery.

After each crisis, besides the positive transformation of the economy, Việt Nam’s position is also shifted up. The first crisis ended, Việt Nam was no longer a member of the least developed group. The second crisis passed, the country moved into the era of comprehensive international economic integration. And after the third crisis, Việt Nam is on way to become a rather modern industrial country by 2020.

By Hải Minh