Vietnam Economy 2024: The Door Is Still Open

Vietnam targets economic growth of 6-6.5% in 2024 - the Year of the Dragon. Compared to growth forecasts from prestigious economic organizations in the world such as the International Monetary Fund (IMF), the World Bank (WB) and the Asian Development Bank (ADB), our goal is within reach. Vietnam's economy is like a cable car line, with only one direction: moving forward, towards a higher peak.

Vietnam's GDP forecast and strong economies in Southeast Asia in 2024 - Source: IMF, WB, Worldbox Intelligence

Carolyn Turk, World Bank Country Director for Vietnam, said that Vietnam’s economy is being challenged by both internal and external factors. To boost growth, the Government needs to support aggregate demand through effective public investment, thereby creating jobs and stimulating economic activities.

At the same time, in addition to short-term support measures, the Government should not neglect structural reforms – including in the energy and banking sectors – as they are imperative for long-term and sustainable growth.

A crucial issue for the Vietnamese economy that the World Bank has highlighted is investment in high-quality human resources. The university and vocational school systems must be further reformed to meet the high growth needs of the economy.

In fact, the above recommendations of the WB are basically quite similar to the recent priorities and directions of the Government. Prime Minister Pham Minh Chinh has requested all levels, sectors and localities to implement specific goals and tasks in 2024 with the theme: "Discipline, responsibility, proactiveness, speeding up innovation, sustainable efficiency" in the spirit of "Five determinations": (1) Determined to remove difficulties, overcome all challenges in all fields; (2) Determined to do not say no, not say difficult, not say yes but do not do; (3) Determined to protect cadres who dare to think, dare to do for the common good; think honestly, speak honestly, do honestly, with real efficiency, so that people can benefit truly; (4) Determined to remove difficulties, promote production and business, ensure that people and businesses enjoy the regimes, policies and achievements; (5) Determined to strive to achieve the best results in 2024.

Public investment is the decisive factor

According to forecasts from most global economic research organizations, the world economy in 2024 will still face many challenges and uncertainties. In addition to geopolitical tensions, climate change and natural disasters have made the world economic picture brighter, but it has not yet recovered to the level before the COVID-19 pandemic.

In that situation, Vietnam in the new year must still take public investment as a growth driver.

The Asian Development Bank's Asian Development Outlook (ADO) report notes that the main drivers impacting the economy are the global economic slowdown, monetary tightening in some developed countries, and disruptions and supply chain disruptions due to rising geopolitical tensions.

In 2024, Vietnam must still use public investment as a growth driver - Photo: VGP/Nhat Bac

Regarding Vietnam's economic outlook, Mr. Shantanu Chakraborty, ADB Country Director for Vietnam said: "The weak external environment, including the slow recovery in China, has hindered export-oriented manufacturing activities, thereby shrinking industrial production in Vietnam."

However, he said, Vietnam's economy remains resilient and recovery is expected to pick up in the coming period thanks to strong domestic consumption, supported by moderate inflation, accelerating public investment and improved trade activities.

Tourism is booming

While Vietnam’s “industrial production” door is shrinking due to falling global demand, other doors will remain open. For example, the tourism and services sector is expected to continue to expand, supported by the recovery of tourism and the recovery of related services.

The New York Times used the image of the cable car system to talk about the tourism economy. According to expert Steven Dale, Vietnam is suitable for building cable cars because it has many mountains, forests and islands. This is considered a "road" with faster construction time, cheaper cost and less environmental damage than roads. According to data from cable car manufacturers, over the past two decades, about 26 cable car routes have been built in dozens of locations across the country, showing the rapid development of infrastructure to serve tourism needs.

"Vietnam is home to four of the world's longest cable car lines, all built in the past decade, reflecting the dramatic transformation of Vietnam's economy and tourism industry," the New York Times emphasized.

In the general difficult situation of the economy, the service and tourism sectors make an important contribution to the country's economic growth. The service sector is gradually recovering, with tourism being a bright spot. Tourism has peaked since the end of April 2023, stimulating increased consumer demand; thereby strongly spreading to the production of other service sectors such as transportation, accommodation, food and beverage, travel, art activities, entertainment, etc., which is a positive factor in economic growth...

In the general difficult situation of the economy, the service and tourism sector is considered a bright spot, making an important contribution to the country's economic growth.

It is still early to say that in 2024, Vietnam's economy will still be among the fastest growing economies in the world, but there is reason to believe that Vietnam's economy will still be among the fastest growing countries in the region.

FDI doors open wide

On January 26, at a press conference in Hanoi, US Under Secretary of State for Economic Growth, Environment and Energy Jose Fernandez said that about 15 US companies plan to invest in Vietnam with a total amount of more than 8 billion USD.

Although Deputy Minister Fernadez did not specify the names of the companies, other sources such as Reuters, Bloombers, Asia Financial, Evertiq... all specifically mentioned several large technology companies...

Fernandez's trip to Vietnam is part of the US plan to implement agreements reached in September 2023, when the two countries officially upgraded their relationship to a "comprehensive strategic partnership", the highest level in Vietnam's diplomatic ranking.

As of January 20, the country had 39,377 valid foreign investment projects with a total registered capital of nearly 471.9 billion USD. The accumulated realized capital of foreign investment projects is estimated at nearly 298.66 billion USD, equivalent to nearly 63.3% of the total registered investment capital in effect.

Vietnam is climbing the high-tech ladder as foreign investment projects are encouraged in chip manufacturing and high-tech. High-tech exports are driving Vietnam's economic growth. In 2022, we surpassed South Korea to become the sixth largest trading partner of the US in terms of export value. While US "disinflation" policies may have hurt Vietnam and other Southeast Asian economies to some extent, Vietnam is still attracting a large amount of foreign direct investment from companies looking to relocate and diversify their supply chains and production.

The case of Luxshare is a case in point. Luxshare, one of Apple’s largest manufacturers of components and finished products, is investing heavily in Vietnam, including about $500 million in a factory in Bac Giang that will employ tens of thousands of workers.

Vice President of the Association of Foreign Investment Enterprises (Vafie) - Mr. Nguyen Van Toan said that the opportunity to attract FDI in 2024 is opening up like in 2008, when Vietnam had just joined the WTO.

People's living standards increased

Despite all the difficulties after the pandemic, the living standards of Vietnamese people have generally improved, thanks to controlled inflation. Vietnam's GDP per capita, calculated by purchasing power parity, has tripled compared to 10 years ago.

Domestic demand will be the main driver of the economy in 2024. According to estimates, Vietnam currently has a trade-to-GDP ratio of 200% (compared to only 35% in Indonesia), so Vietnam's domestic demand makes Vietnam less dependent on foreign countries.

According to the famous economist Stanley Fisher (professor of economics at the University of Chicago and MIT; chief economist at the IMF and Vice Chairman of the Fed), the average income per capita calculated by purchasing power parity (PPP) is a relatively accurate measure of the living standards of people in countries. PPP is often considered a better measure of overall welfare. Former MIT professor Stanley Fischer said: PPP is really the best standard to evaluate the health of the economy. If based on this standard, Vietnam's economy has maintained a stable growth rate over the past 10 years and will continue at a higher rate.

Whether optimistic or pessimistic, the new year 2024 still comes with many challenges, opportunities and also full of hope. As for the Vietnamese economy, like the cable car lines, there is only one direction: moving forward, to reach higher peaks.

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