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The Great Recession and Developing Countries
Table 12.12. Medium-Term Potential Output Projection Year
GDP Labor Investment (constant Gross capital Capital Growth rate growth (%) growth (%) 2000 US$ millions) stock (K/Y = 2) growth (%) of TFP (%)
Actual 2003
7.34
2.32
12,892
76,500
10.67
2.24
2004
7.79
1.82
14,251
84,802
10.85
2.96
2005
8.44
2.16
15,840
93,965
10.81
3.40
2006
8.23
2.38
17,715
104,167
10.86
3.02
2007
8.46
2.20
22,000
115,632
11.01
3.32
2008
6.18
2.45
23,872
130,694
13.03
0.20
2009
5.32
2.34
26,594
146,724
12.27
–0.33
8.20
2.18
28,987
164,515
12.12
2.90
Projected 2010 2011
8.07
2.28
31,596
183,631
11.62
2.85
2012
8.08
2.28
35,160
204,209
11.21
2.85
2013
8.09
2.28
39,126
227,116
11.22
2.85
2014
8.10
2.28
43,539
252,615
11.23
2.85
2015
8.10
2.28
48,451
280,998
11.24
2.85
Source: World Bank Data Catalog and authors’ calculations.
recent turbulence of macroeconomic development in the past two years, has revealed several economic weaknesses in Vietnam and raised the question of whether the country can continue on its current course of economic development in a changing world. Rebalancing With the current global imbalances, characterized by a huge deficit in the United States and surpluses in many Asian countries (especially China), the issue of rebalancing must be addressed. Although global rebalancing implies strengthening domestic demand in Asian countries, the optimal policy mix for rebalancing will necessarily differ across countries. As in other Asian countries, the issue of rebalancing growth has been hotly debated in Vietnam; the debate centers on whether the country should shift its focus to raising domestic demand instead of external demand. The following arguments have been put forward in favor of shifting toward domestic demand: