Vietnam’s economic growth is projected to reduce from 8 percent in 2022 to 6.5 percent in 2024. According to the World Bank, among domestic factors such as “services growth moderates and higher prices and interest rates weigh on households and investors”, there are also external headwinds marked by the ongoing Russia-Ukraine war and widespread global recession which can potentially impact Vietnam’s GDP growth. While that may be so, there is good news that Vietnam was successful in combatting the COVID-19 pandemic and is now ready to become a high-income economy by 2045, an objective set out during the 13th Party Congress.
Vietnam’s National Assembly has announced the target for economic growth to reach 6.5 percent for 2023. The former Deputy Minister of Planning and Investment is upbeat and has observed that the “GDP growth rate scenario of 6.5-7.5 percent in 2031-2050 is reasonable’. This would result in an average income per capita of US$ 27,000-32,000.
Among the many resolutions announced during the November 2022 National Assembly, the focus was also on improving Vietnam’s economic growth. Consequently, the government has adopted favourable policies for enhancing trade. It has chosen to diversify trade partnerships and increase the number of free trade agreements aimed at “opening new opportunities for foreign investors, exporters and importers”.
Among the prominent Vietnamese trading partners, China enjoys the top position, followed by the US, the Republic of Korea, Japan, the EU, and the ASEAN. Vietnam exported to China USD$ 53 billion worth of goods (eleven months of 2022) accounting for an overall growth figure of 13.4 percent. Meanwhile, the US is Vietnam’s 10th largest trading partner and has emerged as an “indispensable node in the US essential goods supply chain” In 2022, Vietnam had a trade surplus of over USD $ 10 billion while the total import-export turnover exceeded USD $730 billion.
The government has also set out ambitious plans to accelerate infrastructure projects, particularly those relating to connectivity. As far as the aviation sector is concerned, the country has projected VND 403 trillion (US$16.2 billion) for airport infrastructure during 2021-2030. This will necessitate favourable policies to draw in private investment given that “public investment alone is insufficient to finance new airport infrastructure”.
Similarly, the maritime sector is being upgraded and according to the Ministry of Transport’s master plan for Vietnam’s seaports for the 2021-2030 period, it is planned to develop 18 public investment projects worth over US$1 billion. During 2022 (first ten months) “Vietnam’s seaports handled 608 million tonnes of goods, up 3 per cent compared to the same period last year and accounting for 84 per cent of the yearly target”.
The energy sector is another priority area for Vietnam with an emphasis on green energy aimed at a net zero by 2050. In 2021 Prime Minister Pham Minh Chinh announced that his country was all set to phase out coal power generation by the 2040s and achieve net-zero carbon emissions by 2050. Also, the National Strategy on Climate Change envisages a 43.5 percent emissions-reduction target by 2030.
The aim is to “curb its dependence on coal, which made up nearly half of the power mix in 2021, and reduce emissions” and switch to greener fuels such as LNG, solar and wind. Vietnam is hoping to purchase LNG from Novatek, Russia’s second-largest natural gas producer. An LNG terminal in Ba Ria-Vung Tau is being built (98 percent complete as of October 2022) and could soon be ready to receive the first consignment. Significantly, Vietnam’s net-zero commitments and its policies are in line with many of the ASEAN grouping member states.
At another level, the Vietnamese government is committed to digitizing the economy and has been investing in high-skilled IT human resources. According to a report, IT enterprises in Vietnam require 530,000 workers and are currently short by 150,000 and this gap could increase to 195,000 by 2024.
Vietnam’s current macroeconomic indicators are quite promising and a report has noted that the country should remain “ASEAN’s top performer in 2023, despite projected softer growth. Slowdowns in private consumption, investment, industrial activity and exports will all weigh on activity,”
Be that as it may, the government policies are quite forward-looking and show promise of sustained economic growth. The country would also need to encourage skill development in products and processes by harnessing digital technologies.
Image Courtesy: White and Case LLP
Disclaimer: The views and opinions expressed by the author do not necessarily reflect the views of the Government of India and Defence Research and Studies.