GDP per capita with Business Cycle in Vietnam (1985-2016)

Sources:

http://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?locations=VN

http://pagines.uab.cat/appliedeconomics/sites/pagines.uab.cat.appliedeconomics/files/pham_b_pa
per.pdf

http://www.nira.or.jp/past/publ/review/2000spring/06thang.pdf

https://www.jstor.org/stable/2645557?seq=1#page_scan_tab_contents

https://ideas.repec.org/p/pru/wpaper/8.html
 Prosperity Stage (7.759%). For the Vietnamese economy, 1995 was a quite good year
because it was a fairly stable period; it was a good year in domestic politics. Vietnam started to
shift from a century-planned economy to a specialist-oriented market economy aftermath war.
Since then, it had played a very important role in their economy such as stimulating export
activities, introducing technology know-how, generating job opportunities, and provides the
capital to meet economic growth target. Recession Stage (2007-2009) Vietnam is one of the only
South East Asian emerging economies not to have gone into recession in 2009 in the wake of the
world crisis. Nonetheless, it has been affected deeply by the crisis, as shown by all macro-
economic indicators. The yearly growth rate of Gross Domestic Product has been slowing down
from 8.5% in 2007 to 6.3% in 2008 then 5.3% in 2009, before recovering to 6.5% in 2010.
Overall, because of productivity gains and rapid growth of the labor force due to the
demographic dividend which is currently peaking, an average economic growth of 7.5% such as
attained during 2000-2008 is hardly sufficient to absorb new entrants on the labor market. The
latter thus absorbs the labor surplus which agriculture and the formal sector are unable to
employ. Depression Stage Consumption poverty fell between 1992 and 1993 finding that fall in
poverty was accompanied by a rise in inequality, with some subgroups of the population failing
to share equally in the strong growth of the country. Recovery Stage: (1993-1994) Finally, they
examine rural poverty dynamics, presenting transition matrices of movements in and out of
poverty over time and estimating a model of consumption change. Vietnam finds that regional
differences are important, as are access to key institutions and infrastructure, and education.
They also find that shifts in employment and production patterns, especially of rice, which they
argue to be induced by the economic reform process, are strongly related to changes in living
standards over time. The adoption of market-oriented institutions and an open door policy
opened the Vietnamese economy to the international economy, resulting in a strong economic
recovery. The economic situation clearly began to show the benefits of the reform of economic
policy.

One of the defining characteristics of the prosperity stage in the business cycle is low
level of unemployment which actually happened in Vietnam with the declining rate from 2.46%
to 2.14% for the years 1994 and 1995 respectively. Additionally, a prosperous economy
experiences relatively high levels of consumer demand and production, matched with increased
purchasing power. This also tends to increase the availability of consumer credit. With the peak
of GDP growth, high level of inflation indicated with about 16.9% change of the same year given
that there are more jobs available, further increasing wages. Research has also shown that an
increase in Foreign Direct Investment leads to higher growth rates therefore during 1994, FDI
rate rose with 11.94%. Shift towards recession relate to prices increasing until they exceed the
purchasing power of the population thus during 2008 inflation peaked at 23.1% whereas
consumer credit becoming overused or misused and employment reaching maximum levels with
low unemployment rate of 2.29%. The recovery in the year begins with the improvement in
demand for capital goods. In order to meet this increased demand, the investment and
employment increase in capital goods industries, which in turn, lead to a rise in incomes with
increasing inflation rate of 9.5% in the year 1994.

Therefore, Vietnam attained economic growth in the years 1992-1997, 2000, 2002-2007,
2010-2011, and in 2015. Economic growth is achieved when growth for the year is within 5 to
7%. Moreover, by the time economic growth is achieved for five consecutive years, economic
development is achieved. Thus, following the theory of Todaro in economic development,
Vietnam achieved economic development since it reached to an economic growth for five
consecutive years; in the years 1992-1997 and 2002-2007. Government interventions greatly
contribute Vietnam’s increasing economy, such as government’s effort as to reforms and plans
amending laws that support foreign trade agreements to invest in the country. Flexible monetary
policies thus contribute to economic growth in the country. Though, global recession in 2008
caused the decline in the economic growth of Vietnam.