Vietnam has navigated the global crisisbetter than many other countries. GDP grew by 5.3 percent in2009, accelerating to 6.9 percent in the last quarter of theyear. At 5.8 percent, the figure for the first quarter of2010 was less impressive, but claims that growth has sloweddown are most probably unwarranted. Exports declined in2009, for the first time since the beginning of economicreforms, but their decline was smaller than in othercountries of the region. By now export growth is convergingback to the 30 percent annual growth rate observed beforethe crisis. Inflation, which had reached 19.9 percent in2008, was down to 6.5 percent in 2009. While there were someworrying signs of inflation acceleration in late 2009 andearly 2010, by now the monthly increase of the ConsumerPrice Index (CPI) is again moderate. And as in previousyears, there were no banking crises despite the continuationof macroeconomic turbulence. More generally, lack of clarityby markets forces the government to overshoot in its policyreactions. Because markets are not sure to understand whatthe government is up to, they need to see very strong actionin order to be convinced that the right course of action hasbeen taken. As a result, Vietnam has had to go throughdramatic shifts in the policy stance as circumstanceschanged. The stabilization policies of 2008 effectively'killed' the real estate bubble and broughtinflation rates to zero in just a few months, but such speedtook a toll on economic activity. The stimulus policies of2009 were equally strong and determined, but they ended upputting too much pressure on international reserves. Withmore information disclosure and better communication, policyshifts could perhaps be less extreme. Combined with strongermacroeconomic management, it should be possible for Vietnamto gradually free itself from the 'stop-and-go'cycle that has characterized macroeconomic policies over thelast three years.
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