Questions such as “When will Vietnam reach upper-middle-income status?” and “When will Vietnam achieve high-income status?” have been increasingly asked in recent discussions. In this context, understanding the World Bank (WB)’s updated classification of global economies for Fiscal Year 2025 (FY2025) is key. Based on these updates, early predictions suggest that by the end of 2026 Vietnam will transition from lower-middle-income to upper-middle-income status. Furthermore, for Vietnam to achieve high-income status by 2045, its GDP growth rate (at fixed prices) must average at least 5 per cent a year between 2024 and 2044.

Understanding the classification system

Under the WB’s classification system, global economies are grouped into four income categories: low-income, lower-middle-income, upper-middle-income, and high-income countries. These groups are updated annually, on July 1, based on the previous fiscal year’s Gross National Income (GNI) per capita, calculated using the WB’s Atlas exchange rate method. The classification is based on the GNI per capita from two years prior, and once classified, countries remain in their income group for the entire fiscal year, even if GNI estimates change during that period.

The WB classifies economies to determine lending policies. Low-income countries often qualify for concessional loans through the International Development Association (IDA), while higher-income countries may shift to loans from the International Bank for Reconstruction and Development (IBRD), which have market-based terms. Other international financial institutions, such as the Asian Development Bank (ADB) and the International Monetary Fund (IMF), also use this classification for their lending policies.

This system has gained wider use beyond its initial purpose, such as in resource allocation and policy decision-making by various countries, which often seek to be classified in the high-income group to enhance their international standing.

Though GNI per capita doesn’t fully reflect a country’s development or well-being, it correlates strongly with quality of life indicators such as life expectancy, child mortality, and education. However, there are limitations: the GNI may underestimate economies with substantial self-sufficiency, and it doesn’t account for income inequality or differences in domestic prices.

GNI estimates are based on official data provided by national economists, while population estimates come from various sources, including biennial figures from the United Nations. The WB uses the Atlas method to convert national currencies into US dollars, smoothing exchange rate fluctuations. This method averages exchange rates over three years and adjusts for inflation, reducing the impact of volatile currency movements.

Income thresholds are updated annually, accounting for inflation. These thresholds are adjusted using the Special Drawing Rights (SDR) deflator, based on inflation data from major economies such as the US, China, Japan, and the Eurozone. For FY2025 (based on 2023 GNI data), the thresholds are as follows: Low-income countries have a GNI per capita of $1,145 or less; lower-middle-income countries range from $1,146 to $4,515; upper-middle-income countries range from $4,516 to $14,005; and high-income countries have a GNI per capita above $14,005.

Vietnam’s performance

Since the launch of the “Doi Moi” (Economic Renewal) process in 1986, Vietnam’s economy has achieved a host of notable milestones. On July 1, 2009, (WB FY2010), it officially moved from the low-income group to the lower-middle-income group. As of 2023, the country’s GNI per capita stood at $4,110; higher than the average for lower-middle-income countries, of $2,511, and only 31.19 per cent of the global average of $13,179.

Under the WB’s income classification system, effective from July 1, 2024, to June 30, 2025, Vietnam remains in the lower-middle-income group, alongside other Southeast Asian countries such as the Philippines, Cambodia, Laos, and Myanmar. In contrast, Malaysia, Thailand, and Indonesia are now classified as upper-middle-income countries, while Singapore and Brunei are the region’s only high-income economies.

The Resolution from the 13th National Congress of the Communist Party of Vietnam set a concrete target for 2025: to become a developing country with modern industry that has surpassed the lower-middle-income threshold. To meet this goal, Vietnam’s GNI per capita in 2024 must exceed the high-income threshold set by the WB for FY2026.

Between 1992 and 2023, Vietnam’s annual growth in both GDP per capita and GNI per capita consistently outpaced the threshold increases required to enter the upper-middle-income group. More importantly, growth in GDP per capita and GNI per capita have been strongly aligned, especially during the 2013-2023 period, allowing for reliable GNI projections based on GDP growth.

According to a General Statistics Office (now the National Statistics Office at the Ministry of Finance) report on the socio-economic situation in the fourth quarter and the full year of 2024, Vietnam’s GDP per capita at current prices is estimated at $4,700, an increase of $377, or 8.72 per cent, against 2023. This means that GDP per capita in 2024 is 1.0872 times that of 2023. Based on this, three scenarios are projected.

 

It can be concluded that Vietnam is unlikely to surpass the lower-middle-income threshold by the end of 2025 (for FY2026 classification). Even in the most optimistic scenario (Scenario 1), Vietnam’s GNI per capita in 2024 would only reach some $4,490; still below the current upper-middle-income threshold for FY2025 ($4,516) and potentially short of the new FY2026 threshold, by $76-$136.

However, given the positive trends in economic and political conditions during the first four months of 2025, it is likely that Vietnam’s GNI per capita growth in 2025 will outperform that of 2024. Therefore, by the end of 2026, Vietnam is expected to definitively move beyond the lower-middle-income category and join the ranks of upper-middle-income countries.

Becoming a high-income nation

The 13th National Congress of the Communist Party of Vietnam has set a clear development vision: by 2045 - the centennial of the founding of the Democratic Republic of Vietnam (now the Socialist Republic of Vietnam) - the country aims to become a developed, high-income nation.

To achieve high-income status, Vietnam’s GNI per capita by 2044 must meet or exceed the threshold set by the WB for fiscal year 2046 (FY2046). Based on the WB’s 2023 data, an important question arises: What average annual economic growth will Vietnam need over the next 21 years, from 2024 to 2044, to meet this target?

Historical data from 1990 to 2023 offers insight. Vietnam’s annual GNI per capita growth consistently outpaced its GDP growth during this period. This trend becomes even more apparent when examining the 21-year moving average (MA21). The MA21 for Vietnam’s GNI per capita shows a significantly higher growth rate than that of GDP, and Vietnam’s GDP growth also consistently exceeds the growth rate of the WB’s high-income threshold.

From 2010 to 2023, the MA21 growth rate for the WB’s high-income threshold averaged 1.0184, peaking at 1.0347 in 2010 and reaching a low of 1.0107 in 2017. Therefore, to determine the conditions under which Vietnam’s GNI per capita in 2044 can meet at least the high-income threshold for FY2046, two key questions must be addressed.

Question 1: What will the World Bank’s high-income threshold be in FY2046?

To answer this, we can consider a challenging scenario in which the WB announces a high-income threshold in FY2046 based on the highest MA21 growth rate observed between 2010 and 2023 - i.e. 1.0347. Under this assumption, the high-income threshold would be: $14,006 × 1.0347²¹ = $28,651.5.

Thus, for Vietnam to be classified as a high-income country by 2045, its GNI per capita in 2044 must exceed $28,652.

Question 2: What average GDP growth rate will Vietnam need from 2024 to 2044 to surpass the $28,652 GNI per capita threshold in 2044?

To address this question, the necessary calculations show that Vietnam’s GNI per capita must grow at a minimum average annual rate of 9.69 per cent between 2024 and 2044. This is derived from the equation ($28,652 / $4,110)^(1/21) = 1.0969.

Historical data from 2010 to 2023 indicates that Vietnam’s GDP MA21 growth averaged 1.0663 during this period, with the highest rate of 1.0706 recorded in 2011 and the lowest, of 1.0622, in 2021. Meanwhile, GNI per capita MA21 growth averaged 1.1186, peaking at 1.1476 in 2012 and dipping to a low of 1.0910 in 2010.

From the given figures, the minimum required GDP growth rate can be estimated under two different scenarios. In the first scenario, using the average MA21 growth from 1990 to 2023, the required GDP growth rate is calculated as (1.0663 × 1.0969) / 1.1186, which equals 1.0456. In the second scenario, based on the lowest MA21 GDP growth year in 2021, when the MA21 GNI per capita was 1.1107, the required GDP growth rate is (1.0622 × 1.0969) / 1.1107, resulting in a figure of 1.0490.

These scenarios indicate that during 2024-2044, Vietnam’s economy must achieve an average real GDP growth rate of around 4.90 per cent per year (rounded to 5.0 per cent) to reach high-income status by the end of 2045.

Additionally, Vietnam’s economy has shown promising growth in recent times, with several new growth drivers aimed at achieving the goal of “reaching a GDP growth rate of 8.0 per cent or more by 2025, laying the foundation for double-digit GDP growth in subsequent years.”

Therefore, an alternative approach to forecasting when Vietnam might achieve high-income status can be outlined as follows: the MA21 growth for the three key indicators from 2010 to 2023 has remained relatively stable, particularly during the 2017-2023 period. Based on this stability, if the global and domestic political and economic conditions from 2025 to 2044 do not experience significant disruptions compared to the 2017-2024 era, it is possible to predict MA21 growth for 2044. The high-income threshold for FY2046, as defined by the WB, would rely on the highest MA21 growth rate observed from 2010 to 2023 (1.0347). By then, the high-income threshold for FY2046 is projected to reach $28,651.5.

The projected GDP and GNI per capita growth for Vietnam are based on the following scenarios.

Scenario 1 (base case - most likely): Vietnam’s GDP and GNI per capita growth are projected to be 1.06 and 1.11, respectively. Under these assumptions, Vietnam’s GNI per capita in 2044 would reach $36,871.1 ($4,110 × 1.1121), surpassing the World Bank’s high-income threshold for FY2046. In fact, Vietnam’s GNI per capita is expected to exceed this threshold as early as 2041, meaning the country would officially achieve high-income status by the end of 2042, provided the average GDP growth rate from 2024 to 2041 holds steady at 6.0 per cent annually.

Scenario 2: Vietnam’s GDP growth rate is expected to be 1.07, and GNI per capita growth would be calculated as (1.07 × 1.1186) / 1.0663 = 1.1225, based on the average MA21 growth rate for these indicators from 2010 to 2023. This would result in Vietnam’s GNI per capita in 2044 reaching $46,516.2 ($4,110 × 1.122521), significantly exceeding the WB’s high-income threshold for FY2046. By 2039, Vietnam’s GNI per capita would surpass the threshold for FY2041, meaning the country could achieve high-income status by the end of 2040 if the average GDP growth rate from 2024 to 2039 is 7.0 per cent annually.

Scenario 3: Vietnam’s GDP growth rate is projected at 1.08, with GNI per capita calculated as (1.08 × 1.1186) / 1.0663 = 1.1330, based on the same average MA21 growth rate from 2010 to 2023. With this growth trajectory, Vietnam’s GNI per capita in 2044 would reach $56,551.5 ($4,110 × 1.133021), or nearly double the WB’s high-income threshold for FY2046. Vietnam’s GNI per capita is expected to exceed the high-income threshold as early as 2037, meaning the country could achieve high-income status by the end of 2038 if the average GDP growth rate from 2024 to 2037 comes in at 8.0 per cent annually.

From these analyses and projections based on the above scenarios, it can be concluded that if the global and Vietnamese economic and political situation from 2025 to 2044 does not experience major fluctuations compared to the period from 2017 to 2024, Vietnam will become a high-income country by the end of 2045 if its economy maintains an average GDP growth rate of 5.0 per cent per year during 2024-2044. If the average GDP growth rate exceeds 5 per cent per year, the country will reach high-income status earlier than 2045. Specifically, if the average GDP growth rate during 2024-2041 is 6.0 per cent, 7.0 per cent, or 8.0 per cent, Vietnam will become a high-income country by the end of 2042, 2040, or 2038, respectively.

These projections indicate that the specific goal outlined in the 13th National Congress of the Communist Party of Vietnam, aiming for Vietnam to reach high-income status by 2045, is entirely achievable. It also advises policymakers not to rush into achieving this goal by over-utilizing resources or implementing excessive interventions in the economy, as this could lead to inefficient use of resources or cause macro-economic instability.

^{(* )}Dr. Pham Minh Thuy is from the Institute of Economics and Finance at the Academy of Finance.