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- GDP (PPP):
- $510.7 billion
- 6.0% growth
- 5.9% 5-year compound annual growth
- $5,635 per capita
- Inflation (CPI):
- FDI Inflow:
Vietnam has gradually been transforming itself into a more open, more market-oriented economy and is beginning to enjoy the benefits of its steady but slow integration into the global commercial system. Reforms have included partial privatization of state-owned enterprises, liberalization of the trade and investment regimes, and modernization of the financial sector.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 54.0 (up 2.3 points)
- Economic Freedom Status: Mostly Unfree
- Global Ranking: 131st
- Regional Ranking: 27th in the Asia–Pacific Region
- Notable Successes: Trade Freedom
- Concerns: Rule of Law and Regulatory Efficiency
- Overall Score Change Since 2012: +2.7
The Socialist Republic of Vietnam remains a Communist dictatorship characterized by political repression and an absence of civil liberties. Economic liberalization began in 1986 with the doi moi reforms, and Vietnam joined the World Trade Organization in 2007. In 2012, Prime Minister Nguyen Tan Dung acknowledged mismanagement of the economy and affirmed his commitment to reforming the state sector, but the Vietnamese are still waiting for dynamic action. Vietnam’s economy is driven primarily by tourism and exports. Persistent inflation and the absence of a transparent legal and regulatory system are disincentives to long-term investment. Vietnam is a party to the recently concluded Trans-Pacific Partnership, which, if implemented, will require further economic liberalization.
Corruption and graft blight all levels of Vietnam’s government and judiciary. Internal dissent and factionalism, bureaucratic rivalries, nepotism, vast corruption within the Communist Party, and a general lack of accountability ensure that many agencies are run as fiefdoms. Many state companies operate with little transparency. Private property rights are not strongly respected, and resolution of disputes can take years.
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 18.9 percent of total domestic income. Government spending amounts to 28.8 percent of GDP. Deficits have been persistently high in recent years, and public debt now equals nearly 60 percent of total domestic product.
Despite ongoing reform efforts, the overall business regulatory framework lacks efficiency. Although no minimum capital is required, starting a business remains time-consuming. The labor market remains dominated by the public sector, but informal labor activity is considerable. The government has reduced pharmaceutical subsidies but maintains price controls and high subsidies for rice and other agricultural commodities.
Vietnam’s average tariff rate is 3.5 percent. Export taxes are imposed on several goods. The government screens foreign investment, and investment in some sectors of the economy is restricted. State-owned enterprises distort the economy. The financial sector continues to expand, and capital markets are evolving. Directed lending by state-owned commercial banks has been scaled back in recent years.