Economic growth and balance-of-payments constraint in Vietnam

Our paper examines the long-run relation between economic growth and current account equilibrium in Vietnam, using a multicountry balance-of-payments-constrained growth model. We find that for the whole sample (1985–2010) Vietnam grew less than the rate predicted by the model. We also find that the balance-of-payments-constrained growth rate shifted after the 1997 Asian crisis. Since the relative price effect is neutral, the volume effects dominate in setting the balance-of-payments constraint. On the one hand, owing to the high income elasticities of exports, growth in advanced countries has a strong multiplier effect on the Vietnamese economy. On the other hand, this effect is hindered by a strong “appetite” for imports coming from Asia. Finally, we assess the impact of the current crisis on Vietnam’s growth for the period 2011 to 2017.