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Source: World Development Indicators.
Vietnam navigated the global financial crisis better than
could have been anticipated, given the high ratio of exports
to GDP and the overall openness of its economy. Real GDP
grew by 5.3 percent in 2009, led by a surge in construction
due to a large extent to the sizeable stimulus program set by
the government between late 2008 and mid-2009. A large
budget deficit, rapid credit growth and moral suasion on state-
owned enterprises resulted in a doubling of total investment
in 2009, pushing up the investment rate to 42.8 percent of
GDP. The state sector accounted for about a third of the total.
The recovery has consolidated in recent months, with real
GDP posting 6.9 percent growth in the last quarter of 2009
year-on-year, and growth of 6 percent is plausible for the first
quarter of 2010.
Reliance on domestic demand to support economic activity
resulted in pressures on the balance of payments. At a
fundamental level, the external position of Vietnam is
sustainable. Exports decreased by 9.7 percent in 2009, the
first decline since the beginning of reforms two decades ago.
Imports contracted by 14.7 percent, which brought the current
account deficit down to about 7.8 percent of GDP, compared
to 11.9 percent in 2008. Inflows of foreign direct investment
are estimated to have declined by a relatively modest
13 percent in a difficult year. For 2009, the capital account
surplus roughly offset the current account deficit. However,
unusually large errors and omissions item in the balance of
payments by about 10 percent of GDP, and the dollar trading
outside the dong band in parallel markets, indicate a lack of
confidence in the dong. Throughout 2009, households and
domestic enterprises (including large state-owned economic
groups) have been betting on a devaluation of the dong.
Meanwhile, inflation shows sign of accelerating. Prices rose