Vietnam’s Own Financial Crisis Averted

Source: Asian Development Bank

Source: Asian Development Bank

The chart to the left shows how many Vietnam dong can be purchased with 1 USD.  Since Vietnam’s currency exchange is fixed, the black market exchange rate is a better indicator.  In 2008, Vietnam’s inflation was out of control and the dong was worth less, much less.

On May 2008, Merill Lynch speculated Vietnam will suffer an inflation shock that may cause investors to pull their investments (really bad).  That did not happen. Amazingly, the Vietnam government was able to contain inflation, reducing it to near zero.  The dong exchange rate on the black market returned to normal.  Crisis averted.

This news is a hopeful mark of progress for a country that I remember barely had running water and toilets when I was young (1980’s).  It reminds me that the Vietnam 20 years ago is much different than the Vietnam today.

Vietnam is not out of the woods yet, the global financial crisis directly affects Vietnam’s export-orient economy.  The crisis has reduced consumptions in most of the countries Vietnam trades with.  The decrease in demand for goods reduces the need for Vietnam’s manufacturing capabilities.  The UN expects Vietnam will not escape the job crisis.  In fact, the Minister of Labor expects 300,000 thousand job cuts in 2009.

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