Menu
Vietnam’s economy has been growing rapidly despite the ongoing Sino-US trade war. The transfer of corporate supply chains from China to Vietnam has been a major contributor to this growth. In 2020, despite the global pandemic, Vietnam still managed to maintain a growth rate of 2.8%, which is remarkable among major economies outside Taiwan. Although the annual growth rate will drop to 2.58% in 2021 due to the impact of the domestic Delta outbreak and government’s epidemic control measures, the overall trend of economic development remains unchanged. The Vietnamese government estimates a growth rate of 8% for 2022. This growth rate is nearly twice the ASEAN average of 4-5%.
Future’s growth is driven by three key factors: diplomacy, business and infrastructure, and a stable labor supply. Additionally, the ongoing global geopolitical situation, particularly the confrontation between China and the US, has also played a role in Vietnam’s growth. With the trade war during the Trump administration and the sanctions during the Biden administration, many labor-intensive industries in China are moving south, making Vietnam a popular choice for companies looking to “China Plus One.”
Vietnam’s diplomacy has been a major advantage, with the country signing numerous trade agreements with various countries and regions in just ten years after joining the International Trade Organization in 2007. Its signing of the EVFTA and UKVFTA agreements demonstrates its strong position in the regional economy, making it an attractive destination for industries with low gross profit margins and high labor intensity.
The country also boasts a relatively complete business and infrastructure, with a high level of domestic political stability due to its one-party dictatorship. This gives it an edge over other competing economies, such as Indonesia and the Philippines, Laos, Myanmar, and Bangladesh. The Vietnamese government has also signed a nine-year infrastructure construction plan, which is expected to improve roads across the country and launch 5G infrastructure development in early 2023.
GDP Data is updated in January, 2023. Figures below represent GDP contribution with the expenditure approach by segment. Data is sourced from World Bank, IMF, and local government and refactored by our team. Forecasted data is from EIU.
Vietnam has an export-oriented economy, with its export-to-GDP ratio reaching 110% in 2021. This is only 62% compared to the ASEAN Synergy period, making it the most export-dependent economy among Southeast Asian countries, except for Singapore. Despite having a lower per capita GDP than most ASEAN countries, Vietnam’s continued growth solidifies its importance within the region.
Over the past decade, economic momentum has come from the expansion of labor-intensive manufacturing and related service industries. Manufacturing made up 25% of GDP in 2021, up from 17% in 2010. Exports of light manufactured goods like clothing, footwear, and furniture grew rapidly, but electronics and machinery exports grew even faster. This is typical of fast-growing low- and middle-income economies where a shift to more advanced export commodities coincides with increased domestic production processes that contribute to GDP.
However, it’s worth noting that although industrial upgrading has increased domestic added value, the growth of advanced industrial exports is largely due to Vietnam’s increasing participation in low value-added international trade. Most of these exports are assembled or undergo basic processing in Vietnam, resulting in a per capita industrial output that is only one-third of the Philippines, a country with a similar per capita GDP.
Currency Exchange: In the past, Vietnam has devalued its currency to improve export competitiveness, but under pressure from the United States, the country began adjusting this strategy from 2021. The Vietnamese government has committed to making its monetary and exchange rate policies more transparent to avoid competitive devaluation. As the Federal Reserve continues to raise interest rates, the US dollar will remain strong against other currencies, including the Vietnamese dong, which at one point fell to a record low of 24,310 per dollar. However, predictions of domestic GDP growth driven by the service industry and manufacturing in the third quarter may lead to the dong’s relative appreciation. Analysts from Mitsubishi UFJ Financial Group, United Overseas Bank, and Maybank have all adjusted their forecasts for the Vietnamese dong against the US dollar, expecting it to fall back to 23,500 in mid-to-late 2023.
Inflation: Inflation in Vietnam has been stabilizing. According to the Vietnam General Statistics Office, the country’s consumer price index (CPI) will rise by 3.15% annually in 2022, meeting the National Assembly’s goal of keeping the inflation rate below 4%. The government expects inflation in Vietnam to decrease from around 5% in the first quarter of 2023, with lower global energy prices further slowing inflation in the second half of 2023.
GDP Data is updated in January, 2023. Figures below represent GDP contribution with the expenditure approach by segment. Data is sourced from World Bank, IMF, and local government and refactored by our team. Forecasted data is from EIU.
With a population of approximately 99.5 million, Vietnam is the 15th most populous country in the world and the 3rd most populous country in Southeast Asia, after Indonesia and the Philippines. The current demographics are conducive to a stable economy, with the country achieving productivity and economic growth over the past few decades. As of 2021, the working-age population will be approximately 67 million, accounting for 67% of the total population. This part of the working population will increase over the next few decades and continue to support economic growth.
Such a population structure is supported by a stable population growth rate. From 2000 to 2019, the national population growth rate has remained at around 1% for many years. However, in recent years, due to the epidemic and the continued two-child policy to restrict births, the population growth rate has dropped below 1%, and it will be 0.8% in 2021, which is the same as the average level of middle-income countries.
Vietnam’s two-child policy is the main reason for maintaining the slow population decline. The government strictly enforced the “ One Child Policy ” in the early 1980s , restricting citizens to a maximum of two children, and formally legislated it in 1986. The government relaxed the two-child policy in 2003, allowing certain families to have a second child, but the restrictions remain strict, subject to approval from the local government. This policy has reduced Vietnam’s total fertility rate (TFR) from its peak of 6.0 in the 1970s to the current level of around 2.0, and has remained stable at this level for more than 20 years.
At the same time, the number of foreign immigrants in Vietnam is very small and the outflow also restrains population growth to a certain extent. According to the report of the United Nations Department of Economic and Social Affairs (UNDESA), international immigrants accounted for less than 0.08% of Vietnam’s population in 2020 . Only 76,767 people registered as immigrants. In contrast, Vietnam’s net population migration rate has averaged -0.8% over the past five years, making it one of the major exporters of labor. There are 3.2 million Vietnamese living abroad, 47 percent of them in North America, and an average of 100,000 workers leave each year, with East Asia as the main destination.
With declining fertility rates and rising life expectancy, Vietnam’s older population is projected to make up 10% to just under 20% of its population by 2035. The average life expectancy of Vietnamese is about 75 years, which is quite high for a middle-income country. This has also led to Vietnam facing the problem of an aging society, and Vietnam will face the prospect of getting old before getting rich.
Vietnam’s per capita GDP is 40% of the global average, and there is still a certain distance from the middle-to-high income level. And the speed at which its population is aging means it will have less time to adapt to an aging society than many advanced economies. According to the World Bank report , Vietnam’s old-age dependency ratio, which is the population over 65 divided by the working population, will increase from 13% in 2021 to 22% in 2039, close to the 26% of today’s high-income countries such as the United States.
Kinh (Viet) 85.3%, Tay 1.9%, Thai 1.9%, Muong 1.5%, Khmer 1.4%, Mong 1.4%, Nung 1.1%, other 5.5% (2019 est. by CIA)
Vietnamese (official), English (increasingly favored as a second language), some French, Chinese, and Khmer, mountain area languages (Mon-Khmer and Malayo-Polynesian)
Catholic 6.1%, Buddhist 5.8%, Protestant 1%, other 0.8%, none 86.3% (2009 est. by CIA)
After Vietnam gained independence in 1945, the government split into a communist-backed North Vietnamese government and a U.S.-backed South Vietnamese government. Ultimately, the civil war ended with a North Vietnamese victory in 1975 and established Communist Party rule over all of Vietnam. Subsequently, in 1978, Vietnam launched an aggression against Cambodia on the grounds of national security, and the Chinese government responded by invading Vietnam.
This series of events made Vietnam have very little contact with the Western world, and its economy and domestic political stability depended heavily on the Soviet government. It was not until the Vietnamese government launched the reform and opening up policy in 1986 that Vietnam began to increase political and trade exchanges with other countries, and made more progress after joining the World Trade Organization in 2007.
In recent years, as many enterprises in advanced countries have transferred many labor-intensive manufacturing industries to Vietnam due to cost considerations, Vietnam received more than US$1.5 trillion in foreign direct investment between 2010 and 2019. In recent years, considerations such as the Sino-US trade war, China’s continued zero-clearing policy, and improving supply chain resilience have also led more companies to shift investment to Southeast Asian countries and India.
Vietnam, which has relatively advantages in trade agreements, labor costs and infrastructure construction, has consolidated its position in undertaking these capital investments and has become the main beneficiary country in this wave, which has greatly stimulated Vietnam’s economic development. It is one of the fastest growing countries in ASEAN and even in the world.
However, corruption, the business environment, continued privatization and infrastructure are still unresolved issues in the country. As far as corruption is concerned, although the ten-year anti-corruption strategy plan launched in 2019 resulted in the punishment of more than 160,000 party members and the conviction of more than 7,000 party members, institutional factors still exist, so corruption persists . Nguyen Phu Trong, who will be re-elected for the third time in 2021, said in a speech broadcast on Vietnamese national television in October 2022 that he will continue to increase efforts to combat corruption.
As can be seen from Vietnam’s five-year plan, the current policy focus of the Vietnamese government will continue to focus on market liberalization and reduce government intervention in business, markets and the overall economy. There are not only political elements to this move, such as incentivizing foreign investment through greater market freedom, but also operational considerations. In Vietnam, so-called state-owned enterprises account for 30 percent of the state budget and 28 percent of GDP, and are also responsible for 60 percent of the country’s non-performing loans.
Based on the remarkable success of the Vietnamese government in trade and investment agreements, its follow-up policies will also increase productivity, especially labor supply, land supply and industrial infrastructure. Especially for land supply, the Vietnamese government also stated that it will reform land use, even foreign ownership (currently only restricting 50-year use rights, and lack of clear mechanisms and regulations on transactions), and provide new means of control.
We work with 3rd party data offices and our experts network to deliver the most comprehensive retail & consumer behavior landscape there is.
E-Commerce Development, Penetration, Trends & Outlook in Vietnam
Social Media Development, User Demographics, Platforms, and Trends in Vietnam
We track the latest developments in major economies around the world.
