June 11 - Things are changing so fast in Vietnam, it's hard to keep track. Last year with a GDP growth rate of 8.5 percent, the country was the place to be, money was pouring in, infrastructure was booming & the country was minting millionaires. Now however times seem to have changed drastically for Vietnam. The countrys' grappling with runaway inflation (25 percent), the highest interest rates in Asia (12 percent), a plunging currency (the dong fell 1.5 percent against the dollar in the last 6 months) and their stock markets nosedived 60 percent to become the worst performing in the world over the last month.

To make matters worse, Moody's, which grades creditworthiness, lowered Vietnam's ratings outlook last week to negative from positive. Poor ratings signal that banks may have trouble meeting their financial obligations, undermining investors' confidence in the country. In a nutshell, the economy overheated and the government was too slow to respond, says Jonathan Pincus, chief economist for the United Nations Development Program in Vietnam in a recent Time magazine article.

Like most emerging economy's Vietnam's crippled economy is disabled by its political system. The government in Hanoi has been slow to tackle some of the problems in part because battle lines are no longer neatly drawn between Communist Party hardliners and the party's more liberal economic reformers. Decision-making has been fragmented to the point of paralysis, says Pincus. For example, no single entity is in control of monetary policy. In a system that works on consensus— not just among the party but committees, ministries and provinces—it has been difficult to get leaders to make tough decisions. "It's always harder to distribute the pain," says Pincus. "It's much easier to distribute the goodies."

To tackle inflation, the government knows it needs to raise interest rates and rein in spending, particularly by state-owned enterprises that have used state financial institutions as their own piggy banks. But any sudden moves can also threaten to strangle businesses and scare away new investors, which Vietnam must avoid if it is to meet its revised 7 percent growth rate.

Still, while the numbers look bad now, Vietnam's long-term economic outlook is good, says Tom Nguyen, head of global markets at Deutsche Bank in Ho Chi Minh City told Time. Some think the government's ability to deal with public dissent swiftly and harshly lessens the threat that strikes will turn into violent protest or will encourage calls for political change. Vietnam remains a stable country of 85 million people with a young and educated workforce.

"It is unreasonable for any of us investors to expect this development process not to have challenges," says Nguyen. "But some of the heartache has to fall in the lap of the people who had unrealistic expectations."

Unfortunately, most of the heartache will be felt by Vietnam's poor as they struggle to put food on the table.