China isn’t the only Asian economy being buffeted by strong headwinds. Vietnam, which has averaged an impressive 6.4 percent growth rate since 2000, is now dropping to a lower cruising altitude as well. Expectations for Vietnam’s GDP growth are now in the 4 percent range—reasonable, to be sure, but a significant downgrade nonetheless.The New York Times outlines the problems plaguing the country:
In Vietnam’s major cities, a once-booming property market has come crashing down. Hundreds of abandoned construction sites are the most obvious signs of a sickly economy.A senior Vietnamese Communist Party official, speaking in the ornate drawing room of a French colonial building, compared the country’s economic problems to the market crash 15 years ago that flattened many economies in Asia.“I can say this is the same as the crisis in Thailand in 1997,” said Hua Ngoc Thuan, the vice chairman of the People’s Committee of Ho Chi Minh City, the city’s top executive body. “Property investors pushed the prices so high. They bought for speculation — not for use.”
Hyperbole aside (Vietnam 2012 is doing much better than Thailand 1997), as we noted earlier this week, the region as a whole is decelerating. The Asian Development Bank estimated that annual growth for the continent (excluding Japan) would come in at 6.6 percent, down from 7.2 percent in 2011.But there is a special Vietnam angle: it is a latecomer to the Asian miracle, and its policymakers and businessmen are still climbing up the learning curve about how to manage the stresses and booms and busts of a market system.Indeed, the property market is only the beginning of Vietnam’s troubles. Government statistics are not considered trustworthy. Connections still matter more than business acumen. Crony capitalism—infused with a dash of Communism—is rampant, with Party operatives and their friends running powerful state-owned companies. Banks are piled high with dodgy loans, credit is shrinking, and consumers have cut back their spending.The result is striking: young people are finding it increasingly difficult to get work, infrasturcture projects are being canceled or delayed, and the spigot of foreign money flowing into the country has been tightened. The question now is whether Vietnamese policymakers can adjust to changing conditions and steer the country back to the high growth rates of the past decade.