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Vietnam Has One of the Highest Rates of Consumer Savings

2020-1-30

The market research company Nielsen reports that Vietnam has one of the world's highest rates of consumer savings. But observers disagree on whether it is a good sign.

Sixty-nine percent of Vietnamese surveyed said they put extra money into savings. That compares with 66 percent of people in China and 62 percent in Indonesia.

As a developing nation, Vietnam is becoming increasingly wealthy. The country’s citizens are saving more, just as many people in countries around the world.

FILE - A man withdraws money from an ATM at a branch of Vietnam Prosperity Joint Stock Commercial Bank (VPBank) in Hanoi, Nov. 15, 2017.
FILE - A man withdraws money from an ATM at a branch of Vietnam Prosperity Joint Stock Commercial Bank (VPBank) in Hanoi, Nov. 15, 2017.

But observers, such as Binky Chadha of Deutsche Bank and former U.S. Federal Reserve chair Ben S. Bernanke worry there is a surplus in savings in the world economy. They say that can misrepresent the larger investment environment and lead to negative interest rates. Negative interest rates mean people would have to pay to keep their savings in a bank.

'An asset bubble'

In the U.S., surplus savings have pushed the stock market to record highs. Experts say the market is nearing a bubble. A bubble happens when there is a sudden increase in price over a short time period that is not supported by the value of a product.

In Vietnam, the extra savings has also led to an asset bubble, especially in the housing market.

Vietnam’s economy is growing quickly, but experts disagree on how to explain the wealth that it is being created. Researchers at the company Oxford Analytica say there may not be enough productive investments available. Savers are investing in luxury real estate that is feeding a bubble. But Nielson Vietnam says being able to save so much money is a good sign from consumers.

Louise Hawley is managing director at Nielsen Vietnam. She told VOA that as more and more people feel more certain about their future, they are saving more rather than spending today.

Worry about retirement?

However, the high savings rate could also mean people worry they will need the money for retirement.

This means Vietnam is part of a global trend identified by Chadha. He noted that savings rates are going up, even though interest rates are going down. He says people are not saving money to earn interest. Instead, Chadha sees this as a sign that people are saving because they fear they will not have enough money in the future.

Vietnam’s savings rate is not uncommon. Bernanke argued that Asia, especially China, has earned so much from exports that the money has aided a worldwide savings surplus. Recently, Vietnam has also become one of the developing Asian nations with high exports and a surplus.

Like China, Vietnam uses its surplus to buy U.S. Treasury bonds. The high demand for U.S. bonds is also a reason the U.S. does not have to pay a lot of interest on its bonds. This helps to lower interest rates.

Vietnam also uses its surplus to buy a lot of foreign money, mostly U.S. dollars. The U.S. Treasury complained in a report this month that this helps increase the value of U.S. dollars and lower the value of the Vietnamese currency. Vietnam’s exports seem even cheaper at a time when the Trump administration wants U.S. consumers to buy fewer Vietnamese products.

Still, Hawley said there is reason for hope in Vietnam. Her company’s December survey showed Vietnam has one of the world's highest levels of consumer confidence, just after India and the Philippines.

I’m Jonathan Evans.

VOA News reported this story. Jonathan Evans adapted it for VOA Learning English. Hai Do was the editor.

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Words in This Story

confidence – n. the feeling of being certain that something will happen or that something is true

currency – n. the money that a country uses : a specific kind of money

survey – v. to ask many people a question or a series of questions in order to gather information about what most people do or think about something