The fiscal omens arising out of Vietnam are not good. Talks of bank runsthe arrests of corrupt officials and an end to an economic era marked by robust growth say it all. More so, is the prospect that Hanoi will seek outside help.
The idea that Vietnam could seek a bailout to resolve debt incurred by the county’s biggest lenders from the International Monetary Fund (IMF) was raised by a Parliamentary Committee but the idea was then almost immediately dismissed by the country’s central bank.
This prospect remains just that, but it did increase the heat on the Vietnamese government to spell out exactly what is needed to correct fiscal imbalances and put the economy back on a secure footing.
Communist governments are not known for making such declarations, which would be mandated if the government was to seek outside help, like an IMF bailout.
Additionally, Chinese finances are also looking very shaky as was detailed in a must read column by Minxin Pei who recently wrote in The Diplomat that we should be worried about the consequences stemming from years of easy credit in China.
The ramifications of a financially depleted China and a recession-prone Vietnam are enormous for Southeast Asia whose economies have done a stoic job in fending off the challenges of the debt-plagued financial route that has hammered the world economy since 2008.
Deregulation within the Association of South East Asian Nations (ASEAN) had vastly improved the ability of the 10-member bloc to trade among themselves, while China’s investment and largesse, particularly in countries like Cambodia, has further improved regional economic outlook.
But on their own some countries – notably Malaysia, Thailand, the Philippines and Indonesia – are looking vulnerable. Growth is weakening, debt is growing, the initial regional benefits of deregulation have run their course and traditional trading partners from the U.S. to Europe, Japan and now China  are unlikely to see a return to the boom times anytime soon.
It’s too early to say whether Vietnam will become Southeast Asia’s Greece. Its government and people are of a vastly different character, inflation is under control and the exchange rate has stabilized.
Nevertheless, housing prices have halved, foreign investment is down by a third and forecast growth rates of five percent over the next two years are paltry for a developing country out to improve its lot.
The outlook is far from good and this will also hurt Vietnam’s immediate neighbors, Cambodia and Laos and ripple across a region where economic uncertainty is fast becoming the issue of the day.