Vietnam’s economy is on track to reach new economic milestones within Southeast Asia by 2030, according to the latest World Bank predictions. The country’s GDP is projected to increase by 5.5% in 2022, up from 2.6% in 2016. As the COVID-19 pandemic is being contained effectively both domestically and abroad, the forecast predicts that Vietnam’s services sector will slowly bounce back. The manufacturing industry will gain from the continued demand from China, Europe, and the United States.
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The same paper states that for Vietnam to meet its goals in terms of trade, it must address three significant economic challenges:
- facilitating eco-friendly trade,
- promoting green FDI (foreign direct investment), and
- developing carbon-free industrial zones
Vietnam’s economy to surpass Singapore by 2036
According to the World Economic League Table 2022 published by the Centre for Economics and Business Research (CEBR), Vietnam’s economy would surpass Indonesia’s in Southeast Asia by 2036. According to purchasing power parity, Vietnam’s GDP per person in 2021 will be USD 11,608. The nation has been able to achieve exceptional economic growth and middle-class status by taking advantage of positive global trends.
The current five-year plan, which covers the years 2021 to 2025 and is intended to ensure the smooth continuation of the current economic development model, is the basis for economic estimates. Manufacturing will be supported as part of the growth strategy by joining global supply chains, developing trade alliances, and diversifying exports. Vietnam’s economic prospects have also been improved over the long term as a result of the country’s expanding middle class, a demonstrably healthier business environment, improved access to markets, and the shift in supply chains to countries with lower costs.
According to VIR, the Vietnamese government wants to become a high-income nation by 2045. To reach this milestone, the nation has to grow at a pace of about 5% per capita on average per year. Vietnam’s current five-year plan predicts, to achieve its objectives, the nation will expand at an average annual rate of 6.5% during the following ten years.
It has several significant obstacles on the road to becoming a high-income country, despite encouraging economic patterns. It must greatly improve the performance of its policy implementation as the world’s trade diminishes and its population ages. The sectors impacted by automated processes and climate change will be disproportionately impacted by these factors.
Additionally, the regulatory framework must be regularly updated and amended with a focus on high-tech industries and the interconnection of economic zones across the nation to support FDI activities in Vietnam.
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Vietnam’s standing in the World Economic League Table is anticipated to improve significantly between 2021 and 2036, according to CEBR. It is anticipated to move up from 41st to 20th by 2036. Only Indonesia and Malaysia will be ranked higher than Vietnam at that time in Southeast Asia.
According to the IMF(International Monetary Fund), Vietnam will rank third in SEA in terms of GDP by 2025 with USD 571.12 billion, trailing Indonesia (USD 1.63 trillion) and Thailand (USD632.45 billion). It will surpass Malaysia (USD 556 billion), the Philippines (USD 523.53 billion), and Singapore (USD 496.81 billion). Also, it is worth mentioning that Vietnam’s economy is predicted to surpass Thailand’s after 2028.
Vietnam will come in third in the Southeast Asian region in terms of GDP by 2025, behind Thailand (USD 632.45 billion) and Indonesia (USD1.63 trillion), according to the IMF (International Monetary Fund). It will surpass the economies of Singapore (USD496.71 billion), Malaysia (USD556 billion), and the Philippines (USD523.53 billion). It’s also important to note that after 2028, it’s expected that Vietnam’s economy will overtake Thailand’s.
Vietnam’s economy is also anticipated to surpass that of Switzerland, Belgium, Sweden, Poland, and Australia by 2036, according to CEBR.
An aggressive push for foreign investment
By 2021 to 2030, Vietnam intends to entice up to 50% of Fortune 500 businesses, according to Deputy Prime Minister Phan Binh Minh. By 2030, it plans to grow registered investment capital by 70-75 percent from Asia, including nations like India, Singapore, China, and Thailand, as well as from Europe, Russia, and the US.
The strategy aims to accomplish the following:
- Streamlined and fair business environment
- Enhanced economic efficiency and competitiveness
- Developing the country’s industrial infrastructure and finding new markets for Vietnamese products made with foreign partners
- Utilizing many free trade agreements to the fullest extent possible
- Innovating and cultivating a culture of creativity
Supporting industries will be established as part of the nation’s industrialisation process. Furthermore, MNCs and domestic firms need to be able to transfer technology more easily.
The government has placed a strong emphasis on cooperation between domestic companies and foreign direct investment in recent years. Through cooperation, science , and technology are employed to promote national growth.
Vietnam’s commitment to monitoring FDI investments and mergers and acquisitions is outlined in the strategy as a major priority to protect national security and interests.
Challenges Remain – the Middle-income trap
Rapid economic expansion and overcoming “the middle-income trap” are Vietnam’s key priorities. Vietnam has employed the “dual economy” concept to achieve this goal, prioritizing specific geographic regions and economic sectors that may be more developed than the rest of the economy.
These prioritized regions and industries have been expected to drive the growth process to achieve overall prosperity. The dual economy strategy has prioritized industrialization and urbanization during the last 20 years. As a result, several locations have drawn greater investments and have seen double-digit development. Some businesses have better access to resources, giving them a competitive edge. Examples include state-owned corporations and big, private organizations with lots of social connections.
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However, socioeconomic development in Vietnam has been unequal; as a result, certain regions are far more developed and dynamic than others, while still, others remain poor and inactive. Natural resource extraction promotes economic progress but has also led to environmental issues.
Between rural and urban communities, as well as between other geographic regions, there are growing differences in income and social welfare. Economic restructuring is slow as a result of how unevenly and individually industry, services, and agriculture are developing.
The Central Ideology Theoretical Council (CITC) will be in charge of creating a new economic growth ideology model for Vietnam for the ten years between 2021 and 2030. Vietnam will be able to finish the industrialization and urbanization processes and escape the middle-income trap with the new model. A model of an “inclusive Development Economy” that prioritizes investment in industries with comparative advantages in each region of the nation has been put forth by the CITC and is known as a “target investment policy.”
Beginning in early 2021, the effective implementation of this program set the stage for the subsequent ten years of national economic growth.
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