The economic context of Vietnam

Economic Indicators

Vietnam is one of the fastest-growing countries in the world, and its economy has shown resilience to trade wars and slower growth rates in neighboring China. This accelerated economic pace is due to labor shifting from agriculture to manufacturing and services, private investment, a strong tourist sector, higher wages, and accelerating urbanization. Exports constitute an increasingly significant contribution to Vietnam's GDP, and certain sectors such as industrial production, textiles, electronics, and seafood production have been growing rapidly. In 2022, Vietnam underwent a resilient economic resurgence following the pandemic (+8%); however, GDP expanded by 5.05% in 2023, falling short of the government's official growth target of 6.5%, primarily due to a slowdown in overseas demand affecting the Southeast Asian export hub (official government data). According to IMF forecasts, GDP growth in Vietnam is expected to pick up to 5.8% this year and 6.9% in 2025.

The government's financial strategy for 2030 incorporates initiatives aimed at expanding the value-added tax base, strengthening the capabilities of tax authorities, streamlining import tariffs, and offering electronic and digital services to taxpayers. The strategy aims for a budget deficit of approximately 3.7% of GDP from 2021 to 2025, with a further decrease to 3% of GDP by 2030. However, Fitch Ratings forecasts the budget deficit to average around 4.3% of GDP between 2024 and 2025, rising from an estimated 4.1% of GDP in 2023. According to the IMF, government debt decreased to an estimated 34% of GDP in 2023, from 35.3% one year earlier, and is expected to further decrease over the forecast horizon (31.7% by 2025). Vietnam's external debt composition remains advantageous, with the majority of debt owed to bilateral and multilateral sources. This structure results in a reduced external debt service burden and bolsters its high external liquidity ratio (Fitch). The General Statistics Office reported that Vietnam's consumer price index for 2023 increased by 3.25% year-on-year, aligning with the target established by the National Assembly. Throughout the year, the prices of housing and construction materials increased by 6.58%; food rose by 6.85%; electricity by 4.86%; drugs and medical services experienced a 1.23% increase; and other goods and services saw a 4.65% uptick. Inflation is expected to return around 2% this year (IMF).

The unemployment rate in Vietnam remains particularly low. It fell to 2.28% in 2023 according to the General Statistics Office. The unemployment rate among young individuals aged 15 to 24 stood at 7.63%, equivalent to 437,300 people, marking a decrease of 0.15 percentage points compared to 2022. Over the last decade, poverty declined impressively, dropping from 16.8% to 5%, although around 13.5 million people are still economically vulnerable (World Bank).

Main Sectors of Industry

Vietnam's economy is diversified, with large state-owned industries in textiles, food, furniture, plastics, paper, tourism, and telecommunications. Agriculture remains a significant contributor, accounting for 11.9% of GDP and employing 34% of the total workforce. Major crops include rice, coffee, cashew nuts, corn, pepper, sweet potatoes, peanuts, cotton, rubber, tea, and aquaculture. In 2023, Vietnam's agriculture sector posted GDP growth of 3.83% and a trade surplus of over USD 11 billion.

Industry contributes significantly to GDP, representing 38.35% and employing 31% of the total workforce. The energy sector, electronics industry, textiles and garments, and automotive industry have seen notable growth. Vietnam has become the third-largest Southeast Asian producer in the oil industry and has experienced rapid expansion in the electronics industry, attracting multinational companies. The manufacturing sector, including textiles and garments, accounts for one-fourth of GDP, with industrial production rising by 1.5% in 2023.

Services play a crucial role in Vietnam's economy, representing 41.3% of GDP and employing 36% of the total workforce. Key sectors include tourism, banking and finance, telecommunications, and retail. Despite challenges from the pandemic, tourism remains significant, with 12.6 million international tourists welcomed in 2023, although this figure was below the pre-pandemic level of 2019. Revenue from lodging and catering services reached around USD 27.77 billion in 2023. The banking sector recorded deposits of more than USD 562.5 trillion, and total goods retail sales and consumer service revenues increased by 9.6% year-on-year to approximately USD 256.7 billion in 2023.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	29.0	33.1	37.8
Value Added (in % of GDP)	11.9	38.3	41.3
Value Added (Annual % Change)	3.4	7.8	10.0

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:

61,7/100

World Rank:

90

Regional Rank:

17

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:

6.25/10

World Rank:

46/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Sources of General Economic Information

Ministries

Vietnam Ministry of Trade
Vietnam Ministry of Planning and Investment

Statistical Office

General Statistics Office of Vietnam

Central Bank

State Bank of Vietnam

Stock Exchange

Ho Chi Minh Stock Exchange
Hanoi Stock Exchange

Economic Portals

Vietnam Economic Portal