Despite challenges, the latest reports by international institutions and domestic analysis believe that Vietnam’s economy will grow well this year after successfully overcoming the difficult year of 2023.

Economists believe that Vietnam’s GDP growth rate will be the second highest in Southeast Asia and among the fastest growing economies worldwide. 

The economy now has opportunities to make a breakthrough after Vietnam has upgraded its relationship with the US and China to comprehensive strategic partnerships. It is also known as an economy with high openness with membership in many bilateral and multilateral free trade agreements (FTAs).

HSBC, in its report released January 11, commented that Vietnam is on a steady recovery path after obtaining an encouraging growth rate of 5.1 percent in 2023. The institution has predicted a growth rate of 6 percent in 2024.

One of the biggest problems it has to face in 2024 is the impact from the Global Minimum Tax (GMT). However, FDI is still expected to see positive signs and Vietnam has advantages over other countries in this issue.

In fact, positive signs began appearing in the fourth quarter 2023, when the growth rate 6.7 percent over the same period of the previous year. 

Exports once again obtained a two-digit growth rate in the fourth quarter thanks to an increase in electronic exports.

Retail, transport and accommodations were the sectors recovering strongly in the fourth quarter, which helped the service sector grow by 7 percent. Meanwhile, the number of foreign travelers increased sharply, equal to 80 percent of 2019.

Vietnam expects a full discovery in 2024, striving for 18 million travelers, higher than the 12.6 million in 2023. Vietnam has to make greater efforts attract travelers from China, the biggest source of travelers which accounts for 30 percent of travelers .

However, 18 million travelers is a big challenge. In 2023, Chinese travelers still did not come back, and Vietnam has to compete fiercely with other regional countries, including Thailand and Malaysia.

Vietnam is now likened by analysts as a ‘magnet’ that attracts FDI, especially large technology corporations. Vietnam is gearing up with a plan on preparing its workforce for the new era of technology development. Vietnam is second in Southeast Asia, just after Singapore, in terms of assessment of Vietnamese students’ abilities.

2024: high expectations, high risks

The World Bank has predicted that Vietnam’s GDP growth rate in 2024 will be 5.5 percent, the second highest rate in ASEAN, after the Philippines (5.8 percent). 

UOB thinks that Vietnam will grow by 6 percent, lower than the 6.5 percent for the Philippines. The International Monetary Fund (IMF) predicted a growth rate of 5.8 percent, just 0.1 percent lower than the Philippines’.

KBSV Securities predicted a GDP growth rate of 6 percent in 2024.

As such, the growth rates are higher than the global average growth rates. The World Bank predicted 2.4 percent for the global economy (it was 2.6 percent in 2023, and 3 percent in 2022).

UOB believes that Vietnam’s major driving forces in 2024 will be exports and FDI.

Michael Kokalari from VinaCapital commented that Vietnam still has advantages over other countries even when GMT is applied. Vietnam has labor costs just half of those of China, while its labor quality is nearly the same. 

Kokalari said the GMT won’t have a big impact on Vietnam’s FDI because tax incentives are not the major factor for multinationals to make investments in a developing country. The multinationals consider many other factors from costs and workforce quality to infrastructure quality and the openness of the business environment.

Regarding FDI sources, HSBC cited many noteworthy features. Japan and South Korea have been big investors in Vietnam over many years, but China has increased its investment in Vietnam rapidly. In 2023, China for the first time held the largest market share among foreign investors in Vietnam. In general, China made up half of the new FDI flow to Vietnam in 2023.

VinaCapital believes that Vietnam’s economy will be stronger in 2024 thanks to the recovery of production and improvements in consumers’ sentiment. 

Manh Ha