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International Economics Brief: Vietnam
Introduction
The Socialistic Republic of Vietnam is a developing country that demonstrated tremendous economic growth during the past 30 years. The economic reforms started by Õi MÛi in 1986 had massive success, turning the country from one of the poorest nations to a lower-middle-income country (World Bank, 2020). Its GDP per capita grew by 2.7 times, and the poverty rate dropped to below 6% from 70% during the past two decades (World Bank, 2020). Its current population is 92 million, the currency is a dong, the primary language is Vietnamese, and the leader is President Nguyen Phu Trong (BBC, 2019). The country is the 70th in the Doing Business (2020) rankings due to the ease of receiving construction permits, getting electricity, and getting credit. The present paper provides an overview of national and international institutions, trade policies, and monetary policies that affect the country. The present brief demonstrates that the Vietnamese government has implemented a wide variety of policies and trade treaties that boosted economic growth.
Institutions
During the past twenty years, Vietnam has integrated deeply with the international economy. The country has become increasingly dependent upon the international economy and organizations. Thus, international organizations have become increasingly important for the country. There are numerous business associations and chambers of commerce in Vietnam that help to develop the business environment in Vietnam (EuroCharm, 2020). The most influential international organizations present in the country are Asia Development Bank (ADB), Mekong Private Development Facility (MPDF), United Nations, and World Bank (EuroCharm, 2020). Even though Nguyen (2020) argues that monetary policies have little impact on the economic growth of developing countries, the recent development of Vietnam demonstrated that both trading and monetary policies have a significant influence on the economic prosperity of the nation.
International Trade Policy and Trends
Vietnam has become an active member of international trading after the reforms. According to Vanham (2018), the country is called an economic miracle as it has allowed the inflow of foreign goods, allowed foreign capital to enter, and invested in the human capital and the infrastructure, which made the country attractive for international businesses. During the past 25 years, Vietnam joined the ASEAN free trade area and the World Trade Organization (WTO), entered free trade with Japan, and signed a series of trade agreements with the US, China, India, and Russia (Vanham, 2018). The reforms were driven by the desire of the public sector to fulfill the needs of the private sector (Vanham, 2018). The exchange rate of Vietnamese Dong to the US Dollar has been dropping consistently during the past twenty years, from 14,500 to 23,100 dong per dollar (Investing, 2020). This created a favorable environment for growth for exports.
International Monetary Policy & Trends
The State Bank of Vietnam (SBV) relies on the credit channel to create incentives for economic growth. This implies that SBV lowers the interest rates in response to an increase in the money supply (Anwar & Nguyen, 2018). This increases domestic investment, which results in significant real GDP growth. According to the International Monetary Fund (2020), the national reserves have more than doubled since 2014, while the growth of total external debt grew only by 24%. Thus, the monetary policy of the country was effective in achieving stable economic growth.
Conclusion
In conclusion, the economic growth of Vietnam is currently stable despite the economic crisis associated with the COVID-19 pandemic (World Bank, 2020). The primary concern for future economic development is to control the epidemic in the country to recover by the end of 2021 (World Bank, 2020). The overview presented in the present paper demonstrates that the country should continue to reform the economy to continue economic growth. In particular, low exchange rates and the participation in trade unions make Vietnam a valuable partner for all the majority of international partners. Vietnam should seek to increase the number of trade treaties to increase its imports.
References
Anwar, S., & Nguyen, L. P. (2018). Channels of monetary policy transmission in Vietnam. Journal of Policy Modeling, 40(4), 709-729.
BBC. (2019). Vietnam country profile. Web.
Doing Business. (2020). Rankings. Web.
EuroCharm. (2020). Organizations in Vietnam. Web.
International Monetary Fund. (2019). Country report: Vietnam. Web.
Investing. (2020). USD/VND US Dollar Vietnamese Dong. Web.
Nguyen, T. M. L. (2020). Output effects of monetary policy in emerging and developing countries: Evidence from a meta-analysis. Emerging Markets Finance and Trade, 56(1), 68-85.
Vanham, P. (2018). The story of Viet Nams economic miracle. World Economic Forum. Web.
World Bank. (2020). The world bank in Vietnam: Overview. Web.
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