Inflation hurts Vietnam yet progress continues.

Since 1997, Vietnam's economy has been growing steadily, as shown on the top shelf of our "bookshelf" chart above. Per capita income has also been growing steadily.

The second shelf of the chart, though, shows that inflation is a problem for the economy and its leaders. The second shelf shows the percent change from year-to-year of the rate of inflation. The International Monetary Fund (IMF) expects Vietnam's rate of inflation to increase 3.5 percent in 2005.

The consensus on Vietnam's economy appears to be quite positive. The Guardian (London) reported in mid-January that Vietnam's economy achieved an annual growth rate of 8 percent between 1990 and 1997, and an average annual growth rate of 7 percent between 2000 and 2003, making Vietnam's economy the second fastest growing economy in the world.

The Guardian also cited United Nations statistics that showed "one of the sharpest declines in the poverty rate in the developing world" from 58 percent of the population in 1993 to 37 percent of the population in 1998 (the most recent year for which accurate poverty statistics are available).

Other positive trends: Vietnam's agricultural sector has performed especially well over the past decade plus. According to a CIA 2003 estimate, 22 percent of the country's GDP is accounted for by its agricultural sector. A majority of Vietnam's workforce (63 percent, according to a CIA 2000 estimate) is employed in agriculture.

In its story, The Guardian pointed out that malnutrition was prevalent in Vietnam in the 1980s. Currently, the country is a leading exporter of rice, coffee, and seafood. The performance of the agricultural sector is a welcome development for the country's consumers.

Not so welcome is the inflation dilemma. Reporting on a recent economic seminar in Hanoi, Thanh Nien (Ho Chi Minh City) said that there was considerable debate among the economists and other experts at the seminar about what to do about inflationary pressures. There were even differences of opinion that inflation was a genuine threat with one expert from Vietnam's Central Economic Management Institute, saying that he didn't think high inflation was a threat as long as there was growth, and suggested that the Government could raise prices of commodities such as coal and electricity gradually mitigating the harm from sudden price hikes.

Price controls, however, have had a poor record in world economies in helping to promote stability, except for brief periods in times of crisis.

There was also discussion at the Hanoi seminar about the Government's target growth rate for 2005. The Government says GDP will grow 8.5 percent in 2005, but the consensus among international economists is that this is unrealistic.

Thanh Nien quoted a resident IMF official to the effect that the 8.5 percent prediction should be taken as a kind of motivating goal, rather than a firm obligation.

The IMF's published estimate of 2005 growth is 7 percent.

Another problem: Corruption. Corruption deters investment, and, says The Guardian, Transparency International, the corruption watchdog organization, rates Vietnam worse than China.

Conclusion: Vietnam shows progress aplenty, but major question marks remain.

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