Economic integration and trade deficit: A case of Vietnam

Abstract

This paper attempts to present a quantitative analysis in order to figure out the reasons of continuous increase of trade deficit in the last decade in Vietnam. After a long period of unceasing economic growth and macroeconomic stability, Vietnam has become one of the attractive investment destinations for many foreigner investors. However, the country starts to worry about its overall economic situation after overexciting the first half of 2007 when Vietnam officially joined the World Trade Organization (WTO) in January the same year. The study explains output multiplier and power of dispersion on import, based on structure of the economy through input - output tables published by General Statistical Office and the Leontief and Keynes’ theories, aiming at helping policy-makers and planners to prioritize the key sectors and appropriate structure for the Vietnam’s economy. The study also introduces a comparison between the power of dispersion on import and the effective rate of protection in order to have the most appropriate economic policy with respect to the WTO’s commitments.