The global financial crisis and economic recession has slowed economic growth in Vietnam. However positive signs of recovery have been emerging as results of government efforts to support economic activity

The recession has had a significant impact on Vietnam’s external sector

The fiscal deficit is expected to widen to about 9.4 person of GDP in 2009, reflecting a decline in revenues and a significant increase in expenditures

Monetary policy has been loosened substantially to support domestic demand after a period of tightening in 2008 to tackle overheating

 

People in the center of the global crisis

Tran Thi Thanh is waiting to cross the road in the busy street near Hoan Kiem lake – the very centre of Hanoi. The 20-year-old, vain-looking and tiny girl feels much pressure of the rocketing price on her daily life.

Being a sophomore at the University of Labor and Society, Tran has to work at night as a baby-wear seller with a meagre 800 thousand dong per month wage (roughly 40 USD) to afford her study and living in the big city. Because of the job, she has to sacrifice time for studying, resulting in losing her scholarship accordingly.

Tran Thi Thanh - Student

She says her life is getting more difficult as all of her classmates and friends at school, especially those from the countryside.

“If not due to the global crisis, the price of living, the room rent would be lower. But since the global crisis wreck the havoc on people, all the prices of room rent, electricity, water increased dramatically. A bunch of vegetable was 500 Dong before and now it is about 3-4-thousand dong. The doubling price makes our life harder.”

Figures that speak

Tran is possibly the luckier than the 14 other million people in Asia, which according to a recent World Bank Report will fall into poverty as a result of the recent crisis.

In Vietnam, the global financial crisis and economic recession certainly slowed economic growth. Export of garments and other industrial products collapsed in the fourth quarter of 2008, and a slowdown in manufacturing became noticeable, resulting in workers losing their jobs or being underemployed. The impact was apparent in the first quarter of 2009, when GDP increased only by 3.1 percent from a year earlier, or 4 percentage points below the average first-quarter growth for the last few years.

The government announced its stimulus package which included various measures, from an interest rate subsidy, to tax breaks, and to additional capital spending. As a result, GDP grew by 4.5 percent in the second quarter and 5.8 percent in the third, raising real GDP growth to 4.6 percent year-on-year for January – September. Fiscal deficit is expected to widen to about 9.4 person of GDP in 2009, reflecting a decline in revenues and a significant increase in expenditures. Monetary policy has been loosened substantially to support domestic demand after a period of tightening in 2008 to tackle overheating.

The picture isn’t that bright when it comes to challenges that Vietnam has to face in the future in its quest for poverty reduction. The pockets of poverty in the poorer and mountainous regions of Vietnam with high concentration of ethnic minorities, urban poor and migrants workers, workers in the informal sectors and households enterprises are specifically vulnerable.

Do Thi Thao - Street Vendor

Do Thi Thao has sold conical hats on the street of Hanoi to tourists for more than a year now. The 17- year-old girl sends money home reguarly to help her parents in Thanh Hoa province in the Northeast support the education of other three brothers and sister.

Today, she has not sold anything since the morning and it was the same for the past several days. She stresses being a street vendor is a very difficult way of earning money.

“Everyone has his/her own destiny. Being a street vendor is extremely difficult. I have to go out no matter how it rains or sun shines.”

Looking ahead

The reports praised Vietnam for doing relatively well in reducing poverty levels, despite the sharp increase in food and fuel prices in the first half of 2008, and the slow growth in late 2008 and early 2009.

At the same time, there are things that still need attention. Greater and more effective investment in education and training of Vietnam’s future workforce, for example, is expected to help reduce vulnerabilities and growing economic opportunities. For people like Tran Thi Thanh, this is definitely important as education will give her a better tomorrow than selling baby clothes like now.

The report also suggests a system of social protection, which is underdeveloped in Vietnam but absolutely necessary if the country moves forward. This will help provide basic services for the most vulnerable people, including ethnic minority people, poor migrants so that they can seek for better opportunities and not having to care for their basic needs. But for now, Do Thi Thao will still have to make ends meet by selling conical hats and crossing her fingers for more tourists to come by.