Vietnam

Economic outlook

Vietnam’s export-oriented economy suffered like all others from the COVID-19 pandemic. Nevertheless, the relatively successful control of COVID-19 and earlier re-opening meant that Vietnam was among the few economies in the world to avoid a contraction in GDP in 2020. Real GDP grew 2.9% in 2020, much slower than the 7% gains on average in the five years prior. Recovery prospects are strong as global trade rebounds. Exports of personal computers and electronics are likely to continue increasing to meet growing global demand from online study and working from home. The IMF projects growth to average 6.8% per annum over the five years to 2025. Still, near-term risks remain elevated, especially following larger COVID outbreaks domestically and overseas more recently.

In the coming years, Vietnam is well placed to attract more trade and investment from within and outside the region. Vietnam is widely seen as a supply-chain alternative to China because of its low labour costs, educated workforce and large and growing population. 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.

Greater industrialisation and a credit boom over the past decade have propelled Vietnam from a low-income to a lower-middle-income country. Beyond the pandemic, continued economic expansion and increases in minimum wages supports projections for a lift in GDP per capita beyond US$5,000 by 2025. As the workforce moves away from agriculture towards more productive manufacturing and services jobs, poverty rates have fallen from over 70% to 6%.