According to the World Bank, Vietnam in 2019 is likely to be among the top three fastest growing economies in East Asia. Real GDP grew 7% in 2019. Exports and manufacturing production proved resilient to the slowdown in global growth. In particular, exports to the US rose by almost 28% in the first nine months of 2019, compared with about 18% in 2018. This offers early evidence that Vietnam has benefitted from a shift in US import demand away from China as US-China trade tensions persist. Foreign direct investment inflows have continued at the high levels reported in 2017 and 2018. Vietnam’s proximity to China, low labour cost and pro-investment policies are supporting rising FDI inflows. Improvements in competitiveness and robust economic fundamentals and human capital are other factors attracting investors to Vietnam. On the domestic front, private consumption has continued to expand solidly on the back of growing wages.
The IMF and World Bank project Vietnam to maintain solid real GDP growth of around 6.5% per annum in the next few years. Household spending will benefit from increases in the minimum wage, while ongoing deregulation will lower the cost of doing business and support greater private investment. Over the long term, Vietnam’s young population and low dependency ratio, alongside the increasing shift into higher-value added manufacturing and services industries, will bolster economic activity. Ongoing global trade tensions and the reliance on large, inefficient state-owned enterprises will remain the key challenges to growth in the next few years and beyond.