The Wall Street Journal weighs in this week on Vietnam’s fall from one of the world’s hottest emerging markets because banks are carrying 10-15% bad loans and more businesses than ever are going bankrupt.
The article highlights the stalled construction projects in Vietnam’s largest cities. It says experts from the International Monetary Fund are calling for “quick and comprehensive action” to solidify weak banks.
The Journal reports that Vietnam is in a dangerous cycle as banks exacerbate the bad-debt situation because they are reluctant to lend to businesses, making it more likely businesses can’t pay back their loans — a downward spiral that could hold back Vietnam’s economy for years to come.
Even so, Vietnam has been underestimated in the past. The country that was facing starvation a generation ago is now one of the world’s biggest food exporters. And rising prices is no longer a major problem in the country that had Asia’s worst inflation a year ago. Time will tell whether Vietnam can overcome its latest setback.