POSITIVE ECONOMIC OUTLOOK FOR VIETNAM

Driven by strong recent economic performance, many foreign agencies have upgraded Vietnam's growth forecasts for 2024 and 2025. The National Assembly set a GDP growth target of 6.5-7% for 2025, aiming for 7-7.5%, while the Prime Minister set a more ambitious 8% growth target.

According to the Asian Development Outlook (ADO) Report released by the Asian Development Bank (ADB) on December 11, ADB revised up Vietnam’s growth forecast for 2024 to 6.4% from the previous forecast of 6% and for 2025 to 6.6% from 6.2%.

Stronger-than-expected trade performance, a resurgence in export-led manufacturing, and ongoing fiscal stimulus measures drove up Vietnam’s economic growth.

According to ADB, given increasing external difficulties, accelerated public investment and accommodative fiscal and monetary policies are necessary measures to further stimulate domestic demand in Vietnam.

ADB believed that Vietnam’s economic outlook is very positive. The country’s economic development since the beginning of the year showed that the driving force for growth in the coming time is macroeconomic stability and domestic drivers, including domestic consumption and investment. Continued macroeconomic stability, stable inflation and exchange rate, and low public debt/GDP ratio expanded the fiscal space for the Government to continue its support policies for better growth. However, government spending needs to be boosted more effectively given the rough export outlook.

Besides ADB, some other financial institutions are optimistic about Vietnam’s economic prospects. In the economic update report on Vietnam released on December 12, Standard Chartered Bank forecast that Vietnam's GDP will grow strongly by 6.7% in 2025, with the first-half growth of 7.5% and the second-half growth of 6.1%.

This prospect is reinforced by exports which grew 14.9% year on year in the first 10 months of 2024 and imports which expanded by 16.8%. The electronics import and export industry continued to recover.

Standard Chartered assessed that the solid manufacturing growth and accommodative monetary policy also helped economic recovery from the beginning of the year. In addition, foreign investment continued to expand, evidenced by strong FDI inflows. Disbursed FDI grew by 8.8% year on year while pledged FDI fund inched up 1.9% year on year. Manufacturing accounted for 62.6% of total pledged FDI in the reporting period while real estate made up 19%, higher than a year earlier.

Despite Vietnam’s optimistic economic outlook for 2025, Standard Chartered also noted that Vietnam needs to be prudent. Inflation may rise again starting in the second quarter of 2025; therefore, Standard Chartered expected interest rates to return to as-usual business in the second quarter.

Moreover, the Fed’s moves will also be a key impact on the State Bank of Vietnam’s monetary policy decisions. Lower USD interest rates is likely to help reduce capital outflows while a sustained trade surplus and strong foreign exchange earnings from tourism will support the Vietnamese dong; however, low import reserves remain a challenge for Vietnam.

Previously, according to HSBC's Report “Vietnam at a glance - A unique class”, Vietnam returned to being the growth star of ASEAN after a rough time in 2023 and the first quarter of 2024. With better-than-expected growth in the third quarter of 2024, HSBC raised its forecast for Vietnam's GDP in 2024 to 7% (from 6.5% previously) and expected to recover more strongly and expand to more sectors in the coming quarters.

In November, the Vietnamese National Assembly officially passed the Resolution on Socioeconomic Development Plan for 2025. According to the resolution, the National Assembly announced 15 main targets, including a growth GDP rate of 6.5-7% and a more determined target of 7-7.5% and a per capita GDP of US$4,900. The share of the processing and manufacturing industry to GDP is 24.1%. The consumer price index (CPI) is forecast at 4.5%.

Besides, the social labor productivity grows 5.3-5.4% on average. The share of agricultural labor to the total social labor force is 25-26%. Trained workers account for about 70%, with about 29-29.5% with professional degrees and certificates. The unemployment rate in urban areas is below 4%. 92% of industrial parks and export processing zones in operation have centralized wastewater treatment systems that meet environmental standards.

Source: VCCI