Foreign Direct Investment in Real Estate Projects and Macroeconomic Instability

One of the main determinants of Vietnam's high economic growth for more than two decades has been its capability to attract foreign direct investment (FDI). FDI has contributed to economic growth through increasing manufacturing exports, creating employment and enhancing total factor productivity. However, this paper argues that the inflow of FDI into the country's real estate and construction sectors stimulated by the property market bubble has contributed to macroeconomic instability. Although the government's policy space to deal with these effects is limited, it should enhance its supervision and encourage FDI into labour-intensive manufacturing sectors.