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New round of quantitative tightening by the Fed, VND420 trillion retreat from Vietnam - YouTube
Channel: Xinxin voit le monde
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shinshin worldview know about the world
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together
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new round of quantitative tightening by
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the fed vnd for 20 trillion retreat from
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vietnam
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the u.s interest rate futures market on
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the 3rd of june showed a 100 probability
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of an expected 50 basis point hike at
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each of the fed's next two meetings
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followed by the fed's most hawkish
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official saint louis fed president
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bullard urging policymakers to quickly
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and sharply raise rates to 3.5 percent
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to curb surging inflation and in
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addition fed governor wallace supporting
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several future several meetings to raise
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rates by 50 basis points each
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meanwhile the fed's new round of
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quantitative tightening qt era has also
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officially opened on june 1st with the
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withdrawal of about 600 billion us
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dollars of base liquidity expected by
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the end of 2022 which fed governor
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wallace said was the equivalent of
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carrying out two to three rate hikes of
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25 basis points each meaning that the
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u.s market is still far from digesting
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the impact of tapering on financial
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markets jp morgan ceo in a report
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published on june 2 warned the u.s
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financial markets to be ready to meet
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the hurricane because the economy is
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facing a series of unprecedented
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challenges including the russian
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ukrainian conflict and quantitative
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tightening because the economy is facing
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a series of unprecedented challenges and
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recommended that investors also be
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prepared
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goldman sachs expects that whether the
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fed's path of rate hikes and tapering is
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accelerated or slowed down it will
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seriously damage the liquidity of the
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u.s financial markets allowing dollar
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interest rates to rise and making asset
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prices volatile because any asset price
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is measured by the price of money the
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core here is the change in interest
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rates the speed and expectation of
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balance sheet expansion and the control
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of u.s bond yields
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this will not only create uncertainty in
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the u.s financial markets where market
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sentiment may be recurring but will also
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create hardship for emerging economies
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with a homogeneous economic structure
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high external debt and a shortage of
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external reserves where the dollar
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siphon effect will begin and will
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increase the volatility of financial
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markets
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the logic behind this is actually quite
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simple the us dollar is the world's main
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reserve and most important settlement
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currency and dominates the foreign
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exchange and commodity pricing power
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environment so the us will be able to
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collect minting taxes from investors in
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these economies through an easy and
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tight dollar cycle and covertly pass on
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its own growing debt costs and inflation
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risks most of these countries are the
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lower end of the industrial chain and
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have a greater dependence on
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the dollar
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the federal reserve is expected to
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continue its aggressive monetary
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tightening policy which will have a
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greater impact on these markets and this
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trend will be more pronounced as the
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dollar liquidity ebbs from flood to
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drought in the process of bottoming out
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once these countries have a shortage of
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dollars in their reserves combined with
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the rising cost of dollar financing it
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will make the pressure to repay interest
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on foreign debt increase rapidly which
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will lead to a plunge in the stock bond
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and exchange markets and even sovereign
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debt default
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according to a new report cited by
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bloomberg on the 31st of may lebanon
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turkey argentina brazil the czech
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republic poland peru malawi sri lanka
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chile mexico mongolia pakistan egypt and
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indonesia are 15 vulnerable markets that
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may face a dollar shortage or high
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dollar financing costs due to a single
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economic development structure and a
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steep inverse pattern of foreign debt
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and foreign reserves
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the latest news is confirming this
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analysis
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malawi located in southeastern africa
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and heavily dependent on agriculture for
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its development suddenly announced on
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the 29th of may a 25 devaluation of its
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currency the kwacha and a return to a
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market determined foreign exchange
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regime to shore up dwindling dollar
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denominated foreign reserves
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sri lanka which relies on tourism as the
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backbone of its economy also announced
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on the 20th of may the country's first
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sovereign debt default crisis in its
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history and warned that inflation could
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soon soar to 40 the currency would
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depreciate sharply and available dollar
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reserves would be depleted as the
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country's economic pillar sectors were
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hit hard by the global public health
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crisis and external reserves continue to
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shrink
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historically every easing and tightening
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of the dollar cycle always triggers
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economic and financial market shocks
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during the transition earlier vivid
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cases of this effect can be referred to
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venezuela and zimbabwe in addition
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turkey argentina and chile three
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countries that have also repeatedly
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defaulted on their sovereign debt and
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have more serious external debt problems
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the risk of a subsequent turmoil in the
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equity debt and currency markets is
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still greater but things do not end here
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the end is not here and the current
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market data appears more insidious
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in recent times the financial markets of
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india and vietnam where there is no
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shortage of foreign reserves have also
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plunged making the continued withdrawal
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of international funds even more
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implying that this round of the dollar
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sucking effect on the market has started
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early becoming the first market to be
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hit since the federal reserve tightened
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monetary policy and the latest data is
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feeding back this change
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according to the latest data released by
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the national securities depository of
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india on may 31 a whopping 1.71 trillion
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rupees of international funds have been
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withdrawn from indian financial assets
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so far in 2022 almost twice the net
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outflow during the 2008 financial crisis
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and the indian currency has now fallen
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to a record low against the u.s dollar
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making it one of the worst performing
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currencies in the world the vn30 index
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has also plunged 24.1 from its 2022 high
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as of may 29 with some sharp-sighted
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international funds retreating from the
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vietnamese market in a big way due to
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strong selling pressure with foreign
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investors selling a net vnd for 20
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trillion in portfolio financial assets
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as of may 30 almost 2.91 times more than
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in the same period last year the vietnam
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express reported on may 31
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experts in the vietnamese securities
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industry said that this downside risk
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will continue to dominate the market and
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will affect all aspects of the
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vietnamese economy amid the current
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intensification of the country's
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financial market situation coupled with
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global risk aversion which poses a
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threat to highly valued assets
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represented by the vietnamese stock
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market
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in its latest report released in may the
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imf predicted that while vietnam's
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external reserves are growing the
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country's dollar denominated external
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debt is expanding at a faster rate and
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has been ranked by international
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agencies as the country in southeast
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asia most in need of fiscal
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consolidation while also facing
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increased macro risks such as escalating
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inflation supply chain shortages adverse
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weather factors developments in the real
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estate and corporate debt markets are
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negative
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impacts on many vietnamese companies
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reuters also analyzed in an article
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published last week that vietnam's
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economy is at risk of being set back 20
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years as macroeconomic risks continue to
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rise
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welcome to subscribe and like it
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if you have a new perspective feel free
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to leave a comment for discussion
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