Vietnam: 30-Year Economic Growth, Poverty Reduction and GDP Increase - Essay Sample

Introduction

Vietnam has enjoyed rapid economic growth over the last thirty years. Economic and political reforms started in 1986 have seen the country grow from one of the poorest economies into a middle-income economy. Poverty rates declined to 6% in 2018 from 70% in 1986, while the GDP per capita has grown to $2,800 in 2018, which is 2.5 times the value in 1986 (World Bank, 2020). In the year 2018, Vietnam's GDP grew by 7.1%, but this is expected to drop to 6.5% for the fiscal year 2019 due to weaker external demand as well as contractionary monetary policies (World Bank, 2020). Manufacturing and services account for the largest share of the country's GDP (Goh, 2018).

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One of the factors contributing to the country's strong economic growth is its ability to attract foreign direct investments. FDI inflows into the country reached $18 billion in 2018 and accounted for about 24% of the total investment (World Bank, 2020). The country has become a favorite destination for multinational manufacturing companies. This is attributed to government stability, low cost of labor, and other production costs. The country looks to benefit from the trade war between China and the US. American companies are considering Vietnam as the number one alternative to manufacturing in China. For instance, Brooks Running, an American footwear manufacturer partly owned by Warren Buffet's Berkshire Hathaway, shifted most of the shoe production from China to Vietnam in 2019 (Stempel, 2019). Apple and other consumer electronics companies are also considering moving their manufacturing from Vietnam to China to avoid increased tariffs resulting from the US-China trade dispute.

Vietnam's growth is also fuelled by the increase in population and social change. In 2018, the country's population was 97 million, an increase from 60 million in 1986 (World Bank, 2020). The population is expected to grow to 120 million by 2050. 70% of the current population of Vietnam is made up of people aged 35 years and below (World Bank, 2020). This indicates that a significant percentage of the country's population is in the productive age. This is favorable for the supply of labor, which is essential for the country's economic growth. Population growth is also favorable for economic growth since it increases the demand for products and services. Furthermore, the growth of the middle class will drive the economy of Vietnam in the coming years (World Bank, 2020). The middle class accounts for 13% of the country's total population. This is expected to rise to 26% by 2026, thereby increasing the demand for goods and services.

The above analysis shows that Vietnam's economic outlook is positive. With increasing FDI inflows and expanding the manufacturing sector, the country's economy is likely to continue growing at a high rate. The rising population and the growth of the middle class will also drive the country's economic growth. In the next 20 years, Vietnam will grow to become one of the industrialized economies.

References

Goh, K. (2018). Vietnam: a 20 year growth story. Retrieved 9 April 2020, from https://bluenotes.anz.com/posts/2018/08/vietnam--a-20-year-growth-story

Stempel, J. (2019). CEO of Buffett-owned Brooks Running moves production out of China, cites tariff threat. Retrieved 9 April 2020, from https://www.reuters.com/article/us-berkshire-buffett-brooks/ceo-of-buffett-owned-brooks-running-moves-production-out-of-china-cites-tariff-threat-idUSKCN1S91DU

World Bank. (2020). The World Bank In Vietnam: Overview. Retrieved 9 April 2020, from https://www.worldbank.org/en/country/vietnam/overview