How will Vietnam deal with a 10-year crisis cycle?

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Vietnam will have solutions to restrict the effects of any future global economic downturn, according to General Statistics Office’s director Nguyen Bich Lam – Vietnamnet reports.

At a press conference on June 29, Duong Manh Hung from GSO warned that both the world and Vietnam will not break out of the economic recession cycle, which occurs every 10 years. Some analysts predicted that the bottom of the cycle will be in 2019-2020. Vietnam will be in the sphere of influence.

With the high openness of the economy (total import/export turnover equal to nearly 200 percent of GDP), Vietnam is vulnerable to external economic shocks. The US-China and US-EU trade wars, if they escalate, will also affect Vietnam’s economy.

Vietnam’s economy has been growing well, but growth remains unsustainable. The ratio of investment to GDP has decreased in the last three years, which will have impact on development in 2019-2020.

Besides, the influences to economic growth may also come from the fact that Vietnam now cannot attract huge investment projects like Samsung and Formosa.

Vietnam’s economy has been growing well, but growth remains unsustainable. The ratio of investment to GDP has decreased in the last three years, which will have impact on development in 2019-2020. 

Lam said that an economic crisis will be no sooner than 2021.

“In 2018-2019 the global economy is still developing well. Financial institutions still forecast a high global trade growth rate,” Lam said.

As for Vietnam, economic recessions occurred in 1979, 1989, 1999 and 2009. Therefore, the government and observers fear that the next crisis will be next year.

Observers cited the risks of the high openness of the economy, the reliance on the foreign invested economic sector, and cash flow into the real estate market.

However, Phan Minh Ngoc, an economist, commented that the cited reasons are only general and cannot explain why the next crisis will break out in 2019.

Regarding the openness of the economy, Ngoc pointed out that some other economies even have ratios of import/export turnover to GDP higher than Vietnam’s. These include Hong Kong (373 percent of GDP in 2016), Luxembourg (407), Malta (268), and Singapore (318), while Vietnam’s ratio was 185 percent in the same year.

Ngoc doesn’t think that the openness of the economy, calculated based on the ratio of import/export turnover to GDP alone, reflects the vulnerability of the economy.

Agreeing that there are uncertainties in Vietnam’s economy, Ngoc affirmed that there is no convincing evidence for an economic crisis in 2019 at the scale and level seen in the last three decades.