Vietnam's economic expectations amid global challenges

Ho Chi Minh City [Vietnam], February 26: Vietnam's economy is assessed to have great potential for rapid growth, affirming its dynamism and continuing to strengthen its position in the global supply chain.
Yesterday, February 25, one of the three most prestigious credit rating agencies in the world, S&P Ratings, released a new report on Vietnam's economy in the context of the global economy facing many challenges.
Great potential
Accordingly, S&P estimates that Vietnam's growth potential will continue to be high in the next decade after reaching 7.1% growth in 2024 even in the context of the real estate market not showing much improvement.
Underpinning this growth is the rapidly expanding export-oriented manufacturing sector, which has helped to anchor Vietnam's trade balance and attract foreign direct investment (FDI). Following the trend of diversifying supply chains outside of China, Vietnam and its business partners (including large global multinationals) are rapidly shifting the destination of investment capital. In 2024, foreign direct investment (FDI) in Vietnam will reach 38 billion USD, equivalent to 8% of GDP. Since 2010, FDI in Vietnam has averaged 10% of GDP.
A key driver of growth for Vietnam is its labor force. The availability of a labor force in rural areas (and other low-income areas and sectors) can be a source of human resources for urban or industrial areas. This is the basis for labor-intensive and low-cost production. The labor force has shown that it can be improved in quality through training, contributing to the confidence of foreign investors in the ability of the Vietnamese economy to absorb further investment.
In addition, rising incomes and growing domestic demand contribute to increasing the demand for urban labor, while promoting growth. In 2024, Vietnam's real private consumption will increase by 6.7%, a sharp increase compared to 3.4% in 2023 - which was considered the peak of the stagnation of the domestic real estate market.
However, the S&P Ratings report also pointed out challenges that pose risks to Vietnam's growth, notably the issue of infrastructure to meet economic development needs.
Accordingly, Vietnam is expected to double its electricity capacity by 2030 and expand it sixfold by 2050 (compared to 2022 levels). Vietnam is aiming for energy transition goals. It is estimated that by 2050, Vietnam will need a total expenditure of up to 535 billion USD to meet these goals.
Regions in trouble due to US tax policy
Meanwhile, S&P Ratings has just released a new report on the Asia-Pacific (APAC) economy - a region that is believed to have a number of economies that could be targeted by the US for trade defense measures. Highlighting the above risk is the possibility that the Trump administration could include them in the list of countries that need to be subject to "reciprocal" tariffs that the White House recently announced.
S&P Ratings predicts that the above US policy could apply to many economies in the region, on a very wide scale. "Our assessment of the key criteria in the US's proposed plan shows that several APAC economies are vulnerable to tariffs - notably South Korea, Taiwan, India, Japan, Thailand...", said Vishrut Rana, senior economist at S&P Ratings.
Similarly, a report recently published by Moody's Analytics (USA) predicts: APAC will be more affected by tariffs than most other regions, due to its deep dependence on trade. In this region, exports have driven growth for decades and also contributed to the recovery from the Covid-19 pandemic. This means that trade defense measures in important markets such as the US can have a profound impact on APAC economies. Meanwhile, domestic consumption in most economies in the region is still limited.
Moody's Analytics forecasts that growth across the APAC economy will slow by 2025 due to trade tensions, policy shifts and an uneven recovery. The region's growth is forecast to slow from nearly 4% in 2024 to 3.7% in 2025 and 3.5% in 2026.
Additionally, while inflation has eased in APAC, allowing central banks to pursue monetary easing, currency depreciation and slow inflation could limit monetary easing.
Source: Thanh Nien Newspaper