Thursday, April 05, 2012


...from the far East. If instability spreads, this will be a important period for "optical backstops" and associated rescue packages from China.

From The Economist:

The Communist Party sticks to its principles and the economy stalls
Mar 31st 2012 | HANOI | from the print edition

AMID the bustling trade and raucous traffic of the Vietnamese capital, innumerable banners exhort citizens to “Celebrate the Spring, Celebrate the Party.” These days, Hanoians do not have much to celebrate. Not long ago, Vietnam was one of the developing world’s pin-ups. Now it is lagging badly.

The most immediate concern is inflation, which last year rose to above 20% for the second time in three years (see chart). Vietnam now has Asia’s highest inflation rate, a fact that government censors have asked local journalists to stop reporting. Thousands of businesses have gone bankrupt, property prices have collapsed and banks and state-owned enterprises (SOEs) are riddled with bad debts.

The reversal has been sudden. Vietnam’s GDP increased by more than 8% a year from 2003 to 2007, when the country attracted a surge of foreign investment. Now the World Bank is predicting that growth will average 6% a year in the five-year period up to the end of 2012. McKinsey, a consultancy, argues that unless Vietnam boosts its labour productivity by more than half, growth is likely to dwindle to below 5%. That will be well short of the government’s target of 7-8%. As McKinsey argues, “the difference sounds small, but it isn’t.” By 2020, Vietnam’s economy could be almost a third smaller than it would have been had economy continued to grow at 7% a year.

No comments: