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- GDP (PPP):
- $552.3 billion
- 6.7% growth
- 5.9% 5-year compound annual growth
- $6,024 per capita
- Inflation (CPI):
- FDI Inflow:
Capitalizing on its gradual integration into the global trade and investment system, Vietnam has been transforming itself into a more market-oriented economy. Reforms have included partial privatization of state-owned enterprises, liberalization of the trade regime, and increasing recognition of private property rights. The economy has registered annual rates of growth averaging about 6 percent over the past five years.
Vietnam’s overall economic freedom is limited by several key institutional factors. Despite ongoing reform efforts, the regulatory environment is not particularly efficient or transparent. Despite progress, investment remains hindered by opaque bureaucracy and a weak judicial system. State-owned enterprises still account for about 40 percent of GDP, hampering the emergence of a more dynamic private sector.
The Socialist Republic of Vietnam remains a Communist dictatorship characterized by political repression and the absence of civil liberties. Economic liberalization began in 1986 with the doi moi reforms, and Vietnam joined the World Trade Organization in 2007. Economic growth was among the fastest in the world during the decade-long tenure of prime minister Nguyễn Tấn Dũng but in 2016, after losing a contest for the highest position, that of General Secretary of the Communist Party of Vietnam, Dung was forced out. He was replaced as prime minister by Nguyễn Xuân Phúc. The economy is driven primarily by tourism and exports. In a major development, the U.S. lifted the long-standing arms embargo against Vietnam in 2016.
All land is collectively owned and managed by the state. Private property rights are not strongly respected, and resolution of disputes can take years. The underdeveloped judiciary is subordinate to the Communist Party of Vietnam, which controls the courts at all levels. Party membership is widely viewed as a way to enhance one’s personal wealth and connections. Corruption and nepotism are rife within the party and in state-owned companies.
The top personal income tax rate is 35 percent, and the top corporate tax rate is 22 percent. Other taxes include a value-added tax and a property tax. The overall tax burden equals 18.2 percent of total domestic income. Government spending has amounted to 29.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 6.7 percent of GDP. Public debt is equivalent to 59.3 percent of GDP.
Administrative procedures have been streamlined, and the regulatory framework for smaller businesses has been improved. The labor market remains relatively rigid. Prices for air travel, water, electricity, telecommunications, postal service, and gasoline are set by the state, which also regulates prices for some natural resources, pharmaceuticals, and products produced by government-run enterprises such as health care, education, and some housing.
Trade is extremely important to Vietnam’s economy; the value of exports and imports taken together equals 179 percent of GDP. The average applied tariff rate is 3.4 percent. Barriers to foreign investment remain significant, but they have been liberalized. Numerous state-owned enterprises distort the economy. The state remains heavily involved in the financial sector. The high level of nonperforming loans continues to limit the pace of credit growth.