The annual global GDP ranking of the International Monetary Fund and the World Bank always shows both GDP Nominal and GDP PPP. Of these, the GDP Nominal is always equal to the figures announced by Vietnam, while the GDP PPP indexes are calculated and announced by these institutions. The accuracy of the result is in question. 

In theory, GDP Nominal measures the economic output of a country, using current market prices. The GDP PPP shows the differences in purchasing power between countries.

The GDP Nominal must be included in official documents of the Party and the State of Vietnam.

With the GDP Nominal, Vietnam in 2023 was 34th in the ranking. For the GDP PPP, Vietnam has ranked 24th since 2022, above the Netherlands and Argentina.

Vietnam has become one of the world’s 20 largest economies based on PPP. This is good news for Vietnam’s transitional economy, because there are few countries like Vietnam which have a ratio of GDP PPP/GDP Nominal at 3x. In other words, the purchasing power of one dollar in Vietnam is three times higher than in the US.

What lies between the GDP Nominal in Vietnam dong and GDP Nominal in US dollar is the dong/dollar exchange rate. In reality, the exchange rate in 2023 was VND24,000 per dollar, so Vietnam’s GDP in 2023 was $430 billion (VND10.221 trillion).

The question is why Vietnam doesn’t adjust the exchange rate to VND20,000 per dollar or lower to raise Vietnam’s GDP in US dollar to $500 billion to $600 billion dollars.

However, the depreciation of currency is problematic. Some countries issued their dollars with an exchange rate of 1:1, but the purchasing power of GDP is based on many factors of the economy, not only currency.

The GDP PPP being three times higher than GDP Nominal could be the factor to explain why Vietnam still has not escaped the middle-income trap, but is the 24th largest economy in the world if calculating PPP. 

This is a special character of Vietnam’s economy and experts think that it would be better if Vietnam calculates the GDP PPP itself, because this will help point out shortcomings or special characteristics of the economy in the current transitional period.

Dinh Duc Sinh