The impact of the stimulus package on the agricultural sector in Vietnam

Abstract

The global financial crisis in 2008-2009 has affected almost all countries. Vietnam was hit by a large fall in export demand and foreign direct investment. Many governments quickly prescribed stimulus packages and Vietnam was no exception. It reduced taxes and increased government spending, mainly by subsidizing loans to state-owned enterprises. The question is what the stimulated impact is, if any, and whether a better outcome could have been achieved by a different mix of policies. In this paper, we use a simple general equilibrium model to quantify the impact of the various components of the stimulus package on the whole economy as well as agricultural sector. The results suggest that, in the short run at least, the stimulus package marginally stabilised national production and income. The package led to a reduction in total welfare because it favoured the non-agricultural sector. The poor in the agricultural sector could be better off if the investment policy were to boost demand for agricultural products. Furthermore, the risk of inflation and real exchange rate appreciation could undermine national competitiveness.Vietnam, fiscal stimulus, agriculture, International Development, Public Economics, E62, D58, Q17,