Soaring national debt puts increased pressure on Vietnam’s aging population

By    October 14, 2016 | 01:09 am PT
Soaring national debt puts increased pressure on Vietnam’s aging population
Female vendors back from wholesale market in the early morning. Photo by Tran Dinh Vui/ Vietnam Street Photography facebook group
Debt-laden Vietnam will soon have to figure out how to pay for a rapidly growing number of old people.

With higher life expectancy and a lower birth rate, Vietnam’s population is aging fast, and the country’s demographics are only heading one way.

The United Nation considers a country to be aging when 10 percent of its population is aged 60 or over. Official statistics show that Vietnam’s population aged 60 or over has steadily increased to the current 10.5 percent from 9 percent in 2009, 8.1 percent in 1999, 7.2 percent in 1989 and 6.9 percent in 1979.

While more than 60 percent of the world's aging countries reach that threshold when their gross domestic product (GDP) per capita exceeds $10,000 and 30 percent reach the threshold when their annual income hits $5,000, Vietnam official became an aging country last year when its GDP per capital was $2,110, economist Nguyen Xuan Thanh said on Thursday.

Vietnam is one of the few countries in the world in which the population has aged before becoming rich or moderately rich, said Nguyen Trong Dam, deputy labor minister.

Widening public debt is putting more pressure on the country's aging population. Soon enough, Vietnam will be grappling with a serious problem- how to pay for a growing number of elderly people.

The government’s out-of-control spending is burdening citizens with growing levels of public debt.

Vietnam’s public debt is forecast to continue rise to 64.9 percent of GDP this year, relatively close to the ceiling of 65 percent set by the National Assembly, after soaring to 62.2 percent last year.

The Southeast Asian country’s gross domestic product was worth $193.60 billion last year, according to the World Bank.

The population of Vietnam is 93 million, so each citizen’s share of this debt is about $1,300, equivalent to 62 percent of individual annual income, said economist Do Thien An, a lecturer at the Fulbright Economics Teaching Program in Ho Chi Minh City.

“Vietnam’s GDP per capital is about one fifth of Malaysia’s. Each Vietnam citizen is carrying a heavier share of growing national debt, up to 62 percent of their annual income, compared to Malaysia’s 52 percent,” said the economist.

Under the national strategy to control public debt towards 2020, last year’s budget deficit was supposed to stand at 4.5 percent of GDP, but in fact the deficit far exceeded the target, Thanh said.

Official figures show the budget deficit stood at 4.4 percent in 2011, 5.36 percent in 2012, 6.6 percent in 2013, 5.69 percent in 2014 and 6.1 percent last year.

The National Assembly has tried to place a cap on the budget deficit in recent years, but state budget expenditure has remained higher than targeted.

The Vietnamese government is aiming to lower the budget deficit to 4 percent on average for the 2016 – 2020 period.

Economists are concerned that with a shrinking working-age population, the productivity of Vietnam’s economy will drop due to a critical lack of labor supply. The working-age population will shrink so quickly that by 2030, one in six Vietnamese will be over 60, and by 2060, one in four will be 60 or older, government figures show.

Not to mention, labor productivity in Vietnam is among the lowest levels in the Asia-Pacific region. According to the International Labor Organization, productivity in Singapore was 15 times higher than in Vietnam in 2013. Even compared to Malaysia and Thailand, Vietnam’s labor productivity is only a fifth and two fifths respectively.

“The prospect of Vietnam’s aging population burdened with growing debt is very much today’s problem,” Thanh said.

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