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

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 noexception. It reduced taxes and increased government spending, mainly bysubsidizing loans to state-owned enterprises. The question is what thestimulated impact is, if any, and whether a better outcome could have beenachieved by a different mix of policies. In this paper, we use a simple generalequilibrium model to quantify the impact of the various components of thestimulus package on the whole economy as well as agricultural sector. Theresults suggest that, in the short run at least, the stimulus package marginallystabilised national production and income. The package led to a reduction intotal welfare because it favoured the non-agricultural sector. The poor in theagricultural sector could be better off if the investment policy were to boostdemand for agricultural products. Furthermore, the risk of inflation and realexchange rate appreciation could undermine national competitiveness.