Vietnam is a hot market among investors in frontier markets. It has a growing, and hard working and cheap work force, a large domestic market, and is liberalising its economic policies, welcoming foreign investors. Manufacturers are seeing it as a place to supplement or complement their China operations.Deficits are relatively modest, and it has not been in international financial markets long enough yet to rack up any serious i.o.u.’s.
But locals don’t trust the government.
What makes them nervous is the suspicion that the governing Communist Party will do anything to hit its economic growth target before a party congress early next year, even if that means letting inflation get out of control.
They are buying US$ and gold whenever they can.
So many dollars have been scooped up, in fact, that the country’s central bank, the State Bank of Vietnam, is at risk of running out, analysts warn. Any shock, like a double-dip global recession that hurts exports or foreign investment, and Vietnam could find itself without enough dollars to pay for crucial imports like fuel, they say.
“The question mark at this point is whether the dollars will come in,” said Ngiam Ai Ling, director of Asian sovereign ratings at Fitch Ratings in Singapore, which warned in March that it might cut Vietnam’s rating, already below what the agency deems investment grade.
NYT article on this and other problems, as well as what’s gd abt Vietnam.