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Economy of Vietnam

Discuss about the Economics of Globalization for Vietnam’s Economy.

This study is examined to understand the economy of Vietnam and do an analysis on the Vietnam’s economy. It is one of the fastest growing economies of Asia. Vietnam is a developing economy but it is expected that soon it will be a developed company. In the first section of this study, Vietnam economy has been described. Vietnam’s government is applying many policies to overcome all the problems and make their nation best one. In the second section, the study revel about Production performance output that what are production performance output and an analysis on production performance analysis of Vietnam in 2005- 2016.

In third section, study on Labour market analysis has been done. In this section it is described that what is labour market and an analysis study on Vietnam labour market in 2005-2016. In fourth section, Price level analysis has been done. This section describes about price level and price level analysis in Vietnam from 2005-2016. The last section is a conclusion section.

Viet Nam had declared one of the highest rates of poverty reduction and economic growth in the world though it was accompanied by higher inequality. There are several factors behind these improvements. Some of the factors are pragmatic party leadership, strong governing and market institutions, wide reaching network of infrastructure, economic policies, initial investment for human development, focus on agriculture and many more (Vandemoortele & Bird, 2011).

Vietnam’s economy is increasing rapidly in recent years. Its Gross domestic product (GDP) was 8.4% in 2005. It forecasted 8.0% in 2006. Vietnam’s highly export helped its economy to grow more rapidly Still much of the population of Vietnam living at rural area and heavily dependent on Biomass energy source (Focus economics,2016). These are dung, rice husks and wood. Thus, the per capita commercial consumption rank of Vietnam is among the lowest in Asia. Its commercial energy is expected to rise in further years because of increasing the rate of natural gas consumption.

Currently in Vietnam the economic activities have lost some speed in comparison of last quarter. The internal reason behind this slow rate is industrial production growth and external reason is less export and high import. The main reason behind less export is Samsung phone scandal, as the phone’s quality and features are not good enough and it had been manufactured in Vietnam.

Production Output Performance Analysis

Production is a kind of process where various material and immaterial inputs combining together for make something to consume. Production output performance is a kind of regular measurement done to check the result or outcome, which generates a reliable data of output on its efficiency and effectiveness.  Output Information doesn’t tell anything related to actual result achieved or the significance of service and product delivered. Output information is needed by a country to analyze the size of input and activities produce.

In 2005, Vietnam’s growth rate of manufacturing sector had increased more than 9%. Vietnam had exposed itself from domestic market to foreign market. Vietnam had expanded its export of manufacturing goods such as footwear and textiles. The liberalization impacted on service sector also as retail and transport service. The people started shifting from agriculture sector to non agriculture sector.

Vietnam manufacturing sector has expanded by 9.3% in 2005 and labour productivity has been increased by 3.1%. As this sector is having a part of 30% of overall GDP, the rapid growth of this department made a sustainable change in Vietnam’s economy. The competitive strength of Vietnam in 2005 was agriculture, service and industry. The main industry of manufacturing sector was ready made clothes and electrical equipment with 12.9% and 12.0% share respectively. The export rate was also increasing in this period. It was among the fastest and largest growing agriculture export country in Asia at that time (Hoang, 2008).

In 2016, the GDP of Vietnam has been rose by 6.7%, more than expected. The performance of manufacturing department is very strong currently with a sharp growth in output, improving in the demand of client and competitive pricing. In this period, many efforts are doing by Vietnam government through make the changes in exchange rate for enhancing the manufacturing sector more.

In Vietnam’s the FDI is also increasing from last few years. Exports have been increased by 10% with a surplus of US$ 2.5 billion. Vietnam public is more skilled now, people are doing work with more effectiveness and efficiency to achieve their target and make the profit. It is directly impacting on GDP of Vietnam. Soon, it is expected by Vietnam to be a developed company. The policies of former government were quite nice and the same is expecting by public from new government.

Thus, it can be concluded that industry is so far so good. Many significant changes has been done in the industry to change the economy of Vietnam from developing to a developed country. Many foreign companies are manufacturing their product in Vietnam right now like Samsung. Vietnam is inviting more FDI to invest in their country and making it a competitive country in the market. 

Labour Market Analysis

Labour market is a place where employees and labour meet with each other. In this market, an employer looks for the best employee whereas workers find for a satisfying job. It is a part of economy where demand and supply of labour is analyzed. Here, Labour demand stands for the firm’s demand of labour and Supply stands for worker’s supply in the market. The demand and supply of labour is influenced by bargaining power of both the parties (Berg, 2015).   

Labour market of Vietnam was in the process of establishment in 2005. There were many shortcomings like partitioned by regions, partition by territories, undeveloped and lack of legal framework etc). The labour market size of Vietnam was 11.10 millions, 25.6% of total labour in Vietnam. The policies affected only non-agriculture sector workers only. Agriculture sector and forestry sector employees were remained limited (Kline, 2007).  In 2005, approx 6% labour were engaged in agriculture sector, 22% labour in non agriculture sector and remained 72% people were self employed out of which 53% self employed people were in agriculture-forestry-fishery sector.

Vietnam’s government was focusing more on labour and their employment. There were 177 public employment introduction centres. Nationwide, approx 3000 employment consultancy introduced in 2005. Thus Vietnam’s labour market was emerging in 2005. Still because of low competitiveness in the labour market, there were imbalance between demand and supply of labour.

In 2016, Vietnam’s labour market is increasing rapidly. Currently, there are 70.17 million people over there among them 24.48 are living in urban area. The inactive population over the age of 15 is 15.77 million people that have been decreased from previous year (General Statistics Office of Vietnam (GSO), 2008).

The labour market participation is increasing continuously even the share in labour market of women has also increased. The quality and quantity of labour Supply has been improved in comparison of last years. A significant change has been found among the school and college going students (Lodhi, 2010).

The ratio of skilled labour has been increased in the market of Vietnam. The skilled worker’s group has divided into 5 groups:Above university there are 134 thousand people (2.77%); Professional degree holder are 454 thousand people (3.06%); 33,000 people from vocational college (18.37%); secondary and primary people are 68,000 people (9.48%) and 46,000 people respectively. There is a declining trend in Agriculture, forestry and fisheries labour also as they all are shifting in non agriculture sector now (Thuy & et all, 2015).

Price Level Analysis

Thus, the market scenario has been changed in a large manner from 2005 to 2016. There are so many changes in the industry. Vietnam has proved itself as one of the rapidly changing countries of Asia. In comparison of 2005, there is more skilled labour in the market and wages rate has also been increased. Because of Globalization, labour requirement has also been increased and its result is showing on the GDP of Vietnam.

Price level is a technique of measurement of current price of any services or goods in the economy in a specific country at a specified time. This technique helps an economist to monitor the changes into the price of goods and services. Price changes due to either inflation or deflation in the market. If there is inflation in the market, the price level will be increased and if there is deflation in the market, then price level will be decreased.  The most common type of price level measurement is consumer price index (CPI). This helps a country to know about its economy and competitive advantage (Arnold, 2008).

In 2005, the economic growth rate was high with an average rate of 7% per annum.  Inflation was managed at a low rate because of high oil prices, bird flu, and rice demand in international market. Vietnam became member of WTO in 2005 and after it the landscape of the country has been improved. In 2005, a huge hike has been noticed in world market and it impacted to Vietnam’s economy with a great increment in consumer price index (An, 2005).

Prices of foodstuffs and food, services etc had increased due to rose in the price of oil and petrol in 2005. As a result of it many products price has been increased specially that product which consumes oil pr petrol while manufacturing (Ngoc, Trinh & Thanh, 2007). Thus, a new and higher price level had been detected in Vietnam economy (Vinh & Fujita, 2007). The CPI was increased by 6.8% at the end of 2005. The new price level impacted on the economy of Vietnam and it resulted as a poor competitiveness of enterprises, products and economy as a whole (General Statistics Office of Vietnam (GSO), 2008).

The CPI of Vietnam in 2016 is increased to 104.67 points in November. In the first 3 months of 2016, 1.3% inflation rates has been rose due to these reasons: Development and investment in Vietnam’s macroeconomic report, draught has caused an increment in agriculture price, foreign investment plan and free trade agreement have become effective.


The increase in the price of medical service, fuel, education, food etc plays key role in the rise of CPI. CPI is out of the control of government. The raise into price of goods drives a higher rate of inflation. Commercial bank forecasted that inflation rate of 2016 in Vietnam will be more than 5% and the same happened (Trading Economics, 2016). The inflation rate increased more than expected and it is because of natural disaster, severe population and price of oil.

The inflation rate was increased in 2005 and 2016 unexpectedly. The reason behind it is some natural problems, higher prices in world market, oil and petrol price increment etc. The more inflation rate, more price of products and at the time of deflation rate, less price of products. The reasons behind gradually increasing the inflation rate are price decided by WTO and oil and petrol prices.


After studying many published articles, newspapers, research papers, books and many more, it can be concluded that Vietnam’s macroeconomic is rapidly increasing. The economy of Vietnam is among the fastest growing economies in Asia. This essay is revealing about product performance output that how a product’s output impacts on economy of a nation, Price level analysis that how price of a product and inflation rate of a country impacts its whole economy and their competitive advantages, Labour market analysis tells about demand and supply of labour and its impact on Vietnam’s economy.

It can be concluded after doing this study that Vietnam is an emerging country and policies applied by the government of Vietnam are really working and helping this nation to grow up. This country is focusing on each element to be a developed company and exports are continuously increasing of this nation that is helping this nation to maintain the inflation rate.


Vandemoortele, M. & Bird, K. (2011). Viet Nam’s progress on economic growth and poverty reduction: Impressive improvements. Overseas Development Institute.

Kline P.M. (2007). Three essays on Labour market analysis: Dissertation Summary. Viewed on 12 Dec 2016 from

An D. V. (2005). Vietnam Economy 2001-2005 and socio economic development plan 2006-2010. Viewed on 12 Dec 2016 from

Trading Economics (2016). Vietnam Consumer Price Index (CPI). Viewed on 12 Dec 2016 from

Vinh, N. & Fujita S. (2007). The impact of real exchange rate on output and inflation in Vietnam: A VAR approach. Viewed on 12 Dec 2016 from

Berg, J. (2015). Labour markets, Institutions and Inequality. Edward Elger Publishing.

Arnold, R. A. (2008). Macroeconomics. Cengage learning.

General Statistics Office of Vietnam (GSO) (2008). National Accounts Online, viewed on 12 Dec 2016 from, accessed 01st July 2008.

General Statistics Office of Vietnam (GSO) (2008). National Accounts Online, viewed on 12 Dec 2016 from, accessed 01st July 2008.

Lodhi, A. H. A. (October, 2010). Land, Labour and Agrarian Transition in Vietnam. Journal of Agarian Change, Vol. 10, pp 564-580.

Focus Economics. (November, 2016). Vietnam Economic Outlook. Viewed on 12 Dec 2016 from

Ngoc, Q. P., Trinh, Q. B. & Thanh, D. N. (2007). Economic performance of Vietnam, 1976- 2000: New evidence from input-output model?, DEPOCEN Working Paper Series No. 2007/13.

Hoang, V. Q. (2008). Vietnam Economic Times. Voung Quan Hoang.

Thuy, N. T. Et all (2015). Exploring vietnam’s progress in economic growth.  Swiss programme for research on global issue for development. World trade Institute.

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