Chapter 2 - Economic growth in the reform process

Summary

The economic reforms that had unfolded progressively in the 1980s have brought about changes in all domains of society. The favourable effects are numerous, an important one being higher economic growth. But side by side with the positive effects are negative socio-economic consequences arising from failure to contain the excesses of the reform policies.

The effects of the reforms on the growth rate can be studied from a comparison of the growth rates of two main indicators, namely: (a) national income, as given by statistics on the material production system (MPS), which is the system used in Vietnam; (b) gross domestic product, which is mainly the national account in United Nations statistics and adjusted for conditions in recent years in Vietnam. Although both indicators reflect the value of output newly created by the economy in one year, they differ in terms of the nature of output covered.

National income includes value added only in material production while gross domestic product comprises value added in all economic activities, both goods and services. Both indicators are used here because Vietnam's statistics prior to 1986 had no data on gross domestic product, and figures on national income are used instead in a comparative study of the stages when different economic policies were being implemented.

1 Growth rates of national income

Figure 6 shows the growth indices of national income of the whole economy and of its main sectors, namely, industry and agriculture. Below is an analysis of the economy's growth during 1976–92:

(1) Overall, the economy achieved a positive growth rate although the rate was not high. If population growth (which was in fact relatively high) was taken into consideration, the economic growth rate could barely compensate for the still-low consumption needs of the population. Generally speaking, in the course of the fifteen years from 1976 to 1991, Vietnam's national income had increased by an average of 3.8 per cent per annum while the population growth was more than 2 per cent a year.