The reform generated positive economic results. The inflation rate was tamed to only 36 percent in 1989 after accelerating at very high rates during 1986–88.14
The improved economic performance during 1989–92 was attributed first to the leading role of the agricultural sector, not only in saving the country from a food crisis but also in actively contributing to demand acceleration and releasing foreign exchange constraints. Arguably, market and price liberalization had a positive impact on the agricultural sector by improving terms of trade and income for peasant households, thus giving them incentives to expand production and marketable surplus. Vietnam became the third largest exporter of rice in 1989 even though it had to import about 400 tons of food during 1987–88. The availability of food, along with the large inflow of consumption goods due to the opening of foreign trade, played a positive role in taming inflation and setting up a sound base for growth in the industrial sector. In addition, rice exports played an important role as the main source of foreign exchange earnings during this period as imports financed by foreign aid from CMEA Growth was accelerated first of all in agriculture, leading to a high demand for the construction and services sectors, which had previously been depressed. During 1989–92, GDP growth was 6.1 percent on annual average, of which growth of agriculture and nonagriculture was 3.8 and 6.9 percent, respectively. Despite the negative impacts of foreign aid cuts due to the collapse of the eastern European socialist system during 1990–91, Vietnam could still maintain a GDP growth of 5.1 and 5.8 percent in 1990 and 1991. By 1992, Vietnam had fully recovered from the shock caused by the collapse of the socialist system, and growth climbed to an 8.7 percent rate (Dollar 1994).
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However, further economic growth could not be sustained as the domestic saving and investment rate was still too low. countries