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Where is Vietnam's Inflation Rate Heading?

Updated on March 24, 2011

Balancing Economic Development with Inflation Rates

Vietnam's Inflation Rate had hit 2 digit highs of more than 10% in the early part of 2011.

Like most developing Asia countries, Vietnam's economy is highly dependent on external economic factors. The good news is that its local business activity and local consumption have definitely picked up and would be instrumental in shielding it from undue outside effects.


What Causes Inflation in Vietnam?

So what is really causing inflation in Vietnam? Vietnam is definitely on track to becoming one of the Asian Tigers. But what makes it different is that its still a low income country which make it doubly prone to the social-economic effects of inflation. China's trend of higher wages should make Vietnam a more attractive production base and should in turn led to more foreign investment.

It might just be that Vietnam's relatively higher inflation rate is still a healthy sign given its in-progress structural changes, increases in productivity and beneficial shifts of the population to higher income levels. A general increase in overall income levels and minimum wages should also lessen the impact of any future increases of inflation rates.

Hot money is definitely flowing into Vietnam. With that in mind, the main threat to Vietnam is still the uncontrolled inwards flow and outwards flow of foreign hot money. Vietnam probably need to emulate China by imposing some controls to attract long term investments as oppose to flighty hot money.

An Interview on BBC with Bill Hayton the Author of the Book "Vietnam - Rising Dragon"

Vietnam's Trading Partners

There's no exact accurate figures on Vietnam international trade. This is because of how data is collected and definition of what constitutes foreign trade with respect to Vietnam. For example, in some cases like trade with foreign organisations based in Vietnam is considered as foreign trade.

Vietnam's major trading partners are the Asian countries (Japan, Singapore, Hong Kong, Taiwan, Korea) accounting for about 80% of total trade. Outside of Asia, it also has the European Union as one of its major trading partners.

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