While observers worry about possible government intervention in the consumer markets if inflation becomes an issue, Vietnam could potentially strike a free-trade deal that could open up markets and benefit Vietnam’s exchange traded fund (ETF).
In Vietnam, Tet, or lunar new year holiday, helped push the consumer-price index up to 2% in February, according to The Economist.
Before Tet, the Central Bank devalued the Vietnamese currency, the dong, by 3.4% in an attempt to get holders of the dollar to buy it. Vietnam may have spent more than $1 billion, over 1% of GDP, in 2009 to buttress its economy, and the credit supply expanded 37%, which increased the black-market price of dollars. [Vietnam Poised to Rebound on Exports.]
Observers will be closely watching March’s inflation data for evidence of whether February’s increase was holiday-driven. Foreign businesses are worried about the government’s response if inflation were to take off – the finance ministry has been hinting at a draft decree that would allow it impose price controls on a range of essential goods.
The European Union and Vietnam announced the start of free-trade negotiations that would allow the E.U. access to Vietnam’s booming markets and provide Vietnam a chance to lure European manufacturers away from China, report John W. Miller and Patrick Barta for The Wall Street Journal. However, the E.U.-Vietnam trade talks may be hindered by protectionist sentiment and human-rights concerns in Europe.
Vietnam’s top exports are textiles, shoes, seafood and coffee, and a free-trade deal could give Vietnam the potential to grow beyond that.
Vietnam’s General Statistics Office expects economic growth to accelerate between 5.7% and 5.9% in the first quarter year-over-year. A free-trade deal could mean even more.
For more information on Vietnam, visit our Vietnam category.
- Market Vectors Vietnam (NYSEArca: VNM)
Max Chen contributed to this article.