In an article published in French newspaper Le Monde on July 26, Hutchinson wrote that Vietnam’s stock market has lost 61 percent of its value this year compared to its peak period more than a year ago, which makes investors unsure about the advantages of investing in the country.

However, the national economy is not as gloomy as investors thought, according to the analyst. He said that any economic success goes along with financial implications and Vietnam is no exception. The Government’s recent 31-percent rise in domestic petrol prices is expected to drive inflation up by 27 percent by the end of the year.

He quoted statistics, saying that in the first half of this year, the country’s trade deficit made up 30 percent of its GDP, but foreign investment accounted for 65 percent of the GDP. Even though the Government has had to cut back on public spending and increase bank interest rates, there are still some reasonable grounds for optimism rather than pessimism.   

Hutchinson said that Vietnam’s issues are similar to those of East European countries. The country’s high inflows of foreign investment have caused the depreciation of its currency and high inflation. The situation got even worse due to price rises driven by soaring energy prices. The Government has adopted urgent solutions to curb runaway inflation. Even though the State Bank of Vietnam recently raised deposit interest rates from 8 to 14 percent, this move did not prove effective enough.

However, the analyst stated that the situation in Vietnam is not as acute as in Eastern Europe, as Vietnam has 85 million consumers and all its economic sectors have high competitive capabilities. With its annual per capita income of less than US$1,000, the country’s primary goal is to raise the living standards of its population, especially in rural areas. It also aims to stop the migration from rural to urban areas.