Vietnam: Surprising Resilience but Challenges Ahead
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GDP. The gap then narrowed during the late 1990s and early 2000s but has widened since 2002, and in 2007–08 it became very large— 9.8 percent. To meet the county’s investment needs and its growth target, the authorities would have had to mobilize foreign savings equal to about 10 percent of GDP if the domestic savings-to-GDP ratio did not improve. Relative to other countries—especially China, where the savings ratio reached 50 percent of GDP—Vietnam’s saving ratio remains low. The ratio of saving to GDP tends to level off, thus widening the gap between domestic saving and investment. Growth Accounting Economic growth in the neoclassical framework derives from two sources: factor accumulation and productivity growth. Using a growth accounting framework, we break down GDP growth during 1986–2008 into three components: capital (K), labor (L), and total factor productivity (TFP) (A) (table 12.4).16 The objective of this method is to determine how much economic growth is due to accumulation of inputs and how much to technical progress. The data reveal an interesting TFP pattern for Vietnam. During the early economic reform period, TFP growth—and, hence, its contribution to GDP growth—was relatively high. However, in the years after the Asian crisis, the country’s TFP almost ceased growing; it picked up after 2000 but then dropped again in 2008 during the global crisis, and posted negative growth in 2009. The growth accounting calculation also confirms the importance of investment to GDP growth in Vietnam. This Table 12.4. Growth Accounting, 1986–2009
Year
GDP (constant GDP 2000 US$ growth millions) (%)
Labor force, total
Labor growth (%)
Investment Gross (constant capital 2000 US$ stock millions) (K/Y = 2)
Capital growth (%)
Growth rate of TFP (%)
1986–90
13,499
5
29,506,375
3
1,865
25,220
2
3
1991–96
19,809
8
33,840,536
2
4,279
29,811
6
5
1997–2002
30,595
7
38,071,353
2
9,167
54,555
11
2
2003–07
45,071
8
42,635,146
2
16,540
95,013
11
3
2008–09
57,279
6
22,803,368
2
25,233
138,709
13
0
Source: World Bank Data Catalog; GSO, http://www.gso.gov.vn; authors’ calculations.