VIETNAM'S GDP GROWTH WILL LEAD THE REGION IN 2025

Vietnam's economy will be the standout among the ASEAN-6, growing at a faster pace relative to its peers during the next few years, according to global economic advisory firm Oxford Economics.

A report published by Oxford Economics on December 16 noted that Vietnam's economy has been the region's outperformer in 2024, with full-year growth likely at 6.7 per cent on-year. The country is expected to continue to outperform its peers next year, growing by 6.5 per cent.

Manufacturing fundamentals remain strong as Vietnam is a hub for assembly, packaging, and testing for semiconductor chips, and the chip-led tailwind will continue next year, though the boost will be weaker than in 2024. Oxford Economics expects some softness in the near-term.

But 2025 should have sufficient upside for manufacturing to remain solid, though the boost will be milder. AI-related global spending on data centres should present a structural boost. Even if Vietnam doesn't fabricate chips, the country's role as an APT hub means it benefits too. Other large exporting sectors are machinery and electrical appliances, textiles, and agriculture. Machinery and textiles should remain particularly resilient. Textile exports should see a boost, given diverted orders from protests in Bangladesh.

The outlook for the domestic sector remains bright with solid wage growth driven by jobs created by foreign investment, supporting private consumption. With the number of operating enterprises still growing in annual terms, asset accumulation will likely be stronger in 2025, though funding from abroad may see a temporary slowdown in early 2025 while awaiting possible US tariff announcements on Vietnam.

The report pointed out that tourism will be another growth area, though it will likely contribute less than it did this year. Tourism receipts in 2023 were 6.6 per cent of nominal GDP. Within Asia, Vietnam has been the second-largest beneficiary of tourism this year, behind Japan.

Higher levels of intraregional tourism, especially from South Korea, are here to stay, and will likely continue beyond 2025. These tourism numbers will not only contribute to service exports, but their spending will likely show up in private consumption numbers down the line. Additional spillovers from tourism-related income will help to drive domestic spending.

Credit growth should be better in 2025. Recent changes to credit controls and a better domestic business sector should provide some support to credit growth. However, the drag from real estate will likely last until end-2025, and offloading bad debt will take some time.

Source: VIR