Vietnam’s short-term economic issues are nothing but a blip in the long-term path to prosperity

Since Vietnam joined the World Trade Organization at the end of 2006, investment into the country has accelerated, and the longer term picture still remains excellent. Much of the import growth is for capital goods which will boost productive capacity and infrastructure which augers well for long term economic prosperity. However, the speed of development and investment has left the economy reeling. An uncontrolled surge in money supply in 2008, together with spectacular growth in imports is leading to short term instability in the economy. At the time of writing, it is possible that the current high inflation rate of plus 20 percent will require severe action by the government if a wider economic crisis is to be avoided.

Far from running for the exit at the first sign of trouble, foreign investors are still falling over themselves to pour money into the country in the firm belief that the short-term economic issues are nothing but a blip in the long-term path to prosperity. Vietnam’s future remains bright with the majority of citizens still believing they are in the midst of an economic boom. GDP growth forecasts for the year have been reigned in to 7.5 percent, with the consensus view of about 7.6 percent for 2009.

Lord of the Manor

The Manor, which became operational early last year, was built and designed to “European standards”, and is conveniently situated nearby Hanoi’s largest supermarkets, Metro and BigC as well as a slew of restaurants looking to tap this new part of suburbia.

“Coming here you will have opportunities to enjoy international standard services because The Manor is a complex including office and commercial areas, residential and sports areas as well as areas for securities exchange and banking,” says Vu Hoang Nhat, The Manor’s Commercial Leasing Manager. With 26-storey towers and rows of villas, The Manor has more than 500 apartments, which have already been sold, and 13,000 square metres of office and commerce-oriented areas, of which 10,000sqm has already been rented. “It is great living here.

High inflation, the tie that binds the real estate market

According to Nguyen Minh Phong from the Hanoi Socio-Economic Institute, a CPI at 5% provides ideal conditions for the real estate market to operate well. Phong said that high inflation has direct and indirect impacts on real estate investments.



First, high inflation makes input expenses higher. Second, high inflation slows down the execution of real estate projects, thus reducing the supply on the market. Third, high inflation makes the capital inflow into the real estate market decrease, while the market needs huge capital sources.



Phan Thi Cuc, Chairwoman of the Vietnam Real Estate Club, agrees with Phong, saying that the real estate market developed rapidly last year, but has become quiet as a result of the high inflation rate.