Fiscal Regulations and Macroeconomic Stability

Source: SaigonTimes (Vietnamese)

By Dr. Jonathan Pincus

Excessive credit growth leads to macro-economic instability, creating asset bubbles, inflation, trade deficit and a weaker local currency. Every major financial crisis in history occurred after a period of excessive lending and borrowing. The article examines excessive lending in Vietnam, the risk and consequences of state-owned enterprises borrowing money and participating in banking sector. It concludes with what the government needs to prioritize in order to stabilize the financial sector.