Which is the fastest-aging nation in recorded history? Those who guess Japan or Finland might be shocked to know the answer is Vietnam.
It will take a little more than 15 years for the share of Vietnamese aged 65-plus to go from 7 to 14% of the population, according to the World Bank. By contrast, in nearby China and Myanmar, the timeline is closer to 25 years, VoA reported.
Speaking in Ho Chi Minh City, World Bank Vietnam director Victoria Kwakwa said this will put a strain on the workforce.
“What you’re going to see is a slowing down, beginning to slow down and ultimately shrinking of the labor force, which will make significant demands on labor productivity,” she said last week at a Canadian Chamber of Commerce in Vietnam forum, where foreigners gave their take on the economy.
Cheap labor has powered businesses in Vietnam, which Kwakwa said was the only country in the region where economic growth was higher in 2015 than 2014.
Graying Workforce
But the graying workforce threatens that growth and adds to a list of challenges policymakers face as Vietnam develops. High debt, low government reserves, and reliance on foreign investment are just a few of the risks to the economy. Other vulnerabilities are beyond Vietnam’s shores, such as a bump in US interest rates, the rout in global commodities prices, and uncertainty about the Trans Pacific Partnership trade deal containing Vietnam.
A country of savers for decades, Vietnam is now witnessing a fairly new phenomenon of household debt. Infocus Mekong Research’s managing director Ralf Matthaes said it “blew me away” when his market research firm found that 30% of consumers took out a loan in 2015.
“Vietnam is becoming a debt culture, which is a little bit like China and some other places,” he said. “So this is, I think, the one thing that I would worry about in the future.”
Public debt is on the rise, too. Vietnam set a debt ceiling of 65% of gross domestic product, and the World Bank estimates borrowing reached 62.5% of GDP last year, up from 59.6% in 2014.
The state is borrowing as revenues fall short of spending by 6.9% of GDP, compared with a fiscal deficit of 6.2% in 2014, the World Bank said.
Restructuring
Despite the uncertainties in the world’s economy, Vietnam still could recover strongly thanks to the implementation of a series of policies to restructure the economy.
Fifty seven percent of enterprises said their business performance went better in the first 10 months of 2015, while 32.1% said their business was stable. Only a small percentage of businesses said they still met difficulties.
Following the growth trend in 2015, the government of Vietnam targets a 6.7% GDP growth rate in 2016 and the inflation rate of below 5%.
This means the government believes the economy will continue growing, while the macro economy would be maintained and inflation would be low.
