The government has set an economic growth goal of 8 percent or more in 2025, laying the groundwork for double-digit growth from next year. What drivers do you think will help realise this?
While the economy is expected to register robust growth in 2025, to achieve 8 percent in 2025 and double-digit growth from 2026 onwards, authorities could consider expanding public investment and supporting domestic demand.
Existing fiscal space allows for much-needed infrastructure investment in backbone services (transport, logistics, energy, and ITC), and improved public investment management would support economic growth in the medium term.
Strategic public investment in backbone services will crowd-in private investment and support private sector development, especially when accompanied by reforms to improve the business environment, including for small- and medium-sized enterprises.
Increasing public investment is considered one of the key solutions to drive the economy forward. What opportunities can you see for private investors, and what challenges remain?
Given Vietnam’s promising economic prospects, opportunities for private investors are plentiful. In our view, as Vietnam seeks to achieve sustainable growth and high-income status, it needs to continue encouraging structural reforms in education and business environment to enhance labour productivity and competitiveness of the domestic economy, and vertical upgrading into high value-added activities in the manufacturing and services sectors.
Reducing the carbon intensity of Vietnamese production is also important to support the competitiveness of the private sector.
The government regards the private sector as a key contributor to economic growth. What is your comment on this vision, and what policies should be applied to encourage the development of private enterprises?
The private sector is certainly a key contributor to economic growth in Vietnam. Vietnam’s economic success story is largely due to its export-driven growth fuelled by private sector firms, especially foreign-invested enterprises (FIEs).
Total exports registered over 90 percent of GDP in 2024. FIEs have consistently invested about 20-25 billion USD a year over the past decade and created millions of jobs, with employment in exports constituting 54 percent of total employment.
Domestically, private investment has been a main driver of growth, and in 2024 contributed 62 percent of the growth in total investments (7.2 percent), but remains below its pre-pandemic contribution of 80 percent.
To encourage private sector development, several complementary policy options could be considered. Firstly, it is necessary to continue strengthening the business environment by easing administrative burden and facilitating access to finance for productive small- and medium-sized enterprises.
It is also necessary to strengthen linkages and productivity spillovers between export firms and the rest of the economy. Vietnam should also upskill the workforce to boost labour productivity growth.
Finally, it is critical is to build on recent reforms and the authorities should take additional steps to strengthen financial sector stability. In particular, the authorities could encourage banks to improve their capital adequacy ratios and strengthen the institutional framework for prudential supervision and early interventions.
According to the World Bank, foreign direct investment (FDI) into Vietnam is to remain steady – at about 25 billion USD disbursed – reflecting the country’s continued appeal to global investors. Could you elaborate?
In the March edition of the World Bank’s biannual economic update, we highlighted that over the past decade, Vietnam has emerged as a top destination for FDI in the region, with inflows averaging 4.6 percent of its GDP - surpassing all other comparator countries in 2022. This inflow has been mostly directed to the manufacturing sector and real estate.
This inflow has been mostly directed to manufacturing sector, and real estate. Given Vietnam’s macroeconomic stability, its trade openness, its established trade relationship with major markets such as the United States, the European Union, ASEAN, and China, and its continued efforts to forge stronger relationships with important developing economies, we expect that Vietnam will remain an attractive destination for further FDI inflows into the medium term.
