The Asian Development Bank (ADB) has maintained positive views of Vietnam’s economic growth and upgraded its projection for the country’s 2025 growth at 6.6 per cent, up from 6.2 per cent forecast in September 2024, according to the Government News.

The Government News quoted ADB Country Director for Vietnam Shantanu Chakraborty as stating during a recent interview by the Vietnam Government Portal (VGP) that this revision is based on Vietnam's strong export performance, including manufacturing, robust foreign direct investment (FDI) performance, supported by a global pivot towards monetary easing and moderate global commodity prices (including the crude oil).

Vietnam is aspiring to reach its goal of becoming an upper middle-income country by 2030. This ambitious aspiration necessitates an average annual growth rate of 7 per cent.

To compensate for the low economic growth during the COVID-19 pandemic, it was understandable that the growth target for 2025 is set at 8 per cent, which will contribute to Vietnam's 2030 goal.

"However, it is essential for Vietnam to prioritize not only the quantitative aspects of economic growth but also its qualitative aspects, as the country's growth foundations need further consolidation. Such growth target should therefore be taken as directional guidance for the government's efforts to boost economic growth in 2025," shared the ADB Country Director.

As Vietnam seeks to maintain its growth trajectory, the foundations for sustainable growth need significant improvement.

By leveraging its growth momentum while addressing structural and external challenges, Vietnam can achieve its vision of becoming an upper-middle-income country by 2030 and a high-income economy by 2045.

Challenges for Vietnam's economy in 2025

Regarding challenges to Vietnam's economy in 2025, Mr. Chakraborty said, the continuing conflicts in the Middle East and between Russia and Ukraine has disrupted the supply chains.

There are significant uncertainties surrounding the global and regional economies in 2025, which in turn will have impact on the Vietnam economy.

While ADB's recent assessment of risk scenarios showed modest implication of such uncertainties in 2025, they will potentially affect the global flows of trade and investment from the second half of 2025, causing lower growth in subsequent years.

Meanwhile, the quality of infrastructure remains a challenge for Viet Nam, although significant progress has been made, but there needs to be a concerted effort to improve the quality of infrastructure.

He underlined the need to deepen financial market, adding that to attract long-term investments in infrastructure, Vietnam needs longer tenor capital, both in terms of debt and equity.

 

"In 2024, Typhoon Yagi caused severe consequences in the country. We need to be very careful about how we can channelize public investment and any type of investments into climate resilient infrastructure, which can withstand the increasing trend towards climate," noted the ADB Country Director.

There is also the issue of some labor shortages, especially in high-tech industries such as AI, FinTech and digital economy, so Vietnam should focus on how to upskill the labor force and address this looming labor shortage, he recommended.

Amid the uncertainties, growth drivers in 2025 will need to be further diversified, with stronger efforts for effective implementation of fiscal stimulus measures, especially public investment in infrastructure, while maintaining a pro-growth monetary policy, he added.

Vietnam maintains fastest growing economy in Southeast Asia in 2024

According to the ADB Country Director, Vietnam achieved remarkable economic success in 2024.

The economy accelerated to an impressive growth rate of 6.8 per cent in the first three quarters of 2024, driven by a combination of robust trade performance, record FDI, and effective policy measures.

The country recorded a significant merchandise trade surplus of $24.3 billion in the first 11 months, providing strong support for economic growth and improving the balance of payments.

Meanwhile, FDI disbursement reached a record $22 billion during the same period, further fueling development.

"Importantly, the government's timely response to the severe impacts of Typhoon Yagi—through rapid reconstruction efforts and financial aid to affected regions—helped swiftly restore economic momentum", Mr. Chakraborty stated.

Additionally, Vietnam's substantial stimulus measures, including extended fiscal support and flexible monetary policy helped maintain a delicate balance between controlling inflation and supporting growth, ensuring stable macroeconomic conditions.

Collectively, these factors underscored Vietnam's resilience and adaptability. This still puts Vietnam as the fastest growing economy in Southeast Asia in 2024.

Positive signs from the across-the-board institutional reforms

Mr. Chakraborty held that there are positive signs from the across-the-board institutional reforms recently initiated, with welcomed improvements in many important areas like the public investment law, procurement law, electricity law and public-private partnership.

If effectively implemented, these broad reforms can enhance efficiency by reducing bureaucracy, improving public services and cutting the cost of doing business and energize additional growth drivers, he added.

 

Remarkably, the reform in public investment law can further support the economic recovery and foster overall economic resilience.

Public investment is a critical engine of economic growth. According to the Ministry of Planning and Investment, an increase of 1 per cent in public investment disbursement corresponds to a 0.058 per cent increase in GDP growth. In addition, every VND1 of disbursed public investment capital stimulates VND1.61 of investment capital from the non-state sector.

The government has recently undertaken significant reforms in revising public investment law to address longstanding challenges in the preparation and implementation of public investment projects, aiming to streamline the approval procedures for ODA-funded projects.

Therefore, recent broad base institutional reforms in Vietnam are welcomed not only for public investment but also for the overall economy. Streamlining and increasing the efficiency of the governance structure is essential for effective regulatory reforms, highlighted the ADB Country Director.