Overview

Vietnam Economy Performance

Vietnam’s economy has emerged as a significant development success, transitioning from one of the world’s poorest countries to a middle-income economy within a generation. In 2023, Vietnam's real GDP per capita rose to over USD 4,300, marking a sixfold increase since 1986. The country’s real GDP grew by 6.42% year-over-year (Y-o-Y) in the first half of 2024, slightly lower than the value recorded in the same period in 2022. Inflation pressures have also intensified post-pandemic, driven by rising food prices, with the Consumer Price Index (CPI) increasing by 3.88% Y-o-Y in the first nine months of 2024. However, the IMF projects that inflation will remain within the State Bank’s target range of 4-4.5% for the year.

Despite facing external pressures such as global inflation and supply chain disruptions, Vietnam's contribution to global GDP remains modest but significant, with a focus on enhancing its manufacturing capabilities. The country is currently navigating a transitional phase, aiming to increase its manufacturing value added (MVA) and diversify its economic base.

Vietnam's port infrastructure has also become a cornerstone of its economic development, driven by the country's strategic position in global supply chains and its role as a manufacturing hub for multinational companies adopting the China+1 strategy. Vietnam's coastline stretches over 3,200 kilometers, featuring over 320 operational ports. This extensive network facilitates the efficient movement of goods, which is vital for meeting the growing demand of international trade. In the first half of 2024, container traffic surged, further cementing Vietnam’s crucial role in global logistics and trade networks.

Despite rapid developments, Vietnam's labor market is experiencing signs of strain, especially among the youth population. Although the overall unemployment rate is relatively low, youth unemployment remains a significant issue, with many young adults employed in informal or precarious jobs. Enhancing vocational training and education is essential to improving labor market conditions. However, challenges persist, with over 70% of the workforce lacking formal training, and more than three-fifths of workers holding informal jobs.

Vietnam's economic autonomy is also influenced by its trade relationships, particularly with major partners like the United States and China. This interconnectedness has implications for economic stability, as external shocks can impact local markets. However, Vietnam's strategic initiatives to enhance foreign direct investment and develop capital markets are expected to bolster economic growth and resilience. Vietnam's strategic geographical position and increasing integration in the global economy, bolstered by the "China+1" strategy, position it as a key player in Southeast Asia’s economic landscape.

Looking ahead, Vietnam aims to achieve high-income country status by 2045. To attain this, the country must sustain an average annual per capita growth rate of approximately 6% over the next two decades. However, Vietnam faces significant obstacles, including labor market challenges and inflationary pressures, which could impede its long-term ambitions. Nevertheless, its strong economic fundamentals and attractiveness for investment place it on a path of continued growth and development.

Vietnam Real GDP Growth, Annual % Change, 2019 – 2024E

In 2023, Vietnam's service sector emerged as the largest contributor to the country's GDP, accounting for more than 40%. The sector’s expansion has been supported by improved living standards, a growing middle class, and a population exceeding 100 million. Consumer spending and rising demand for higher standards in education, healthcare, and leisure services have also driven this growth.

Future Growth Prospects

The economic outlook for Vietnam remains positive, with real GDP growth projected to rise steadily in the coming years. According to the Asian Development Bank (ADB), Vietnam’s GDP is expected to grow by 6% in 2024 and 6.2% in 2025.

Vietnam’s economic performance is driven by its industrial production, strong exports, and infrastructure investments. The country is also set to benefit from the continued shift of manufacturing activity into Southeast Asia, with Vietnam emerging as a hub for electronics and textile production. However, external challenges such as demand fluctuations in key markets like the U.S. and Europe, as well as geopolitical risks, could impact growth prospects.

Inflation poses a challenge in the short term, with rates expected to rise to 3.5-4% in 2024. This increase is primarily attributed to the expanding money supply, higher demand for services such as healthcare and education, and rising energy costs. Nevertheless, inflation is projected to stabilize over the longer term, with the IMF forecasting an average inflation rate of 3.4% from 2025 to 2029.

The development of capital markets would provide a vital source of long-term funding for Vietnam's economy and help the country achieve its goal of becoming a high-income nation by 2045. Thus, as the country strives for resilience and transformation, it must capitalize on its potential while safeguarding against predatory practices that threaten its development.

Scope of the Vietnam Economy Performance Report

Makreo Research has published a detailed analysis titled "Vietnam Economy Performance Report," offering a comprehensive overview of the country’s economic landscape. The report delves into historical and current economic trends in Vietnam, covering key metrics such as GDP, inflation, gross national income, etc. It also provides an in-depth examination of job market developments at both national and regional levels.

The analysis further explores FDI trends in Vietnam, evaluating various factors and their impact on the economy, alongside the performance of key industries.

In addition, the report assesses Vietnam’s trade performance, analyzing the import and export of goods and services across different parameters and highlighting significant trade-related factors. Moreover, the report offers a future economic outlook, considering factors that could shape Vietnam’s growth trajectory. It also examines the country’s port infrastructure and its economic impact, along with potential implications for the future. This comprehensive analysis equips stakeholders and industry professionals with valuable insights into Vietnam’s evolving economic environment.

• What has been the historical performance of the Vietnamese economy, and what are its current conditions?

• Which sectors are considered the major contributors to the Vietnamese economy?

• How does the GDP performance of Vietnam appear, and what factors are influencing this performance?

• What has been the inflation rate in Vietnam, and what factors contribute to these inflation rates?

• What does the job market look like in Vietnam, and what is the situation regarding youth unemployment in the country?

• What is the current scenario for foreign direct investment (FDI) in Vietnam, and how does FDI vary across different regions?

• What does the trade performance (including import and export) of Vietnam look like?

• What are the key industries in Vietnam, which sectors dominate these, and what emerging industries are developing in the country? How are these industries performing?

• What is the current economic performance of Vietnam?

• How are the manufacturing and other sectors in Vietnam performing?

• What is the economic situation in different regions of Vietnam, such as Hanoi, Ho Chi Minh City, and Da Nang?

• What does the future outlook for Vietnam's economy entail, and which geopolitical factors are expected to influence it, as well as those that are currently having an impact?