The government will do all it can to reach its desired growth goal this year, with specific targets assigned to all localities and more assistance provided for businesses.
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| Localities playing part for overall growth goal |
The government last week issued a resolution on growth goals for sectors and localities to hit a growth rate of 8 per cent upward this year.
Each locality in the country has been required to achieve a regional GDP of at least 8 per cent. Many must grow at a double-digit rate, such as Bac Giang (13.6 per cent), Haiphong (12.5 per cent), and Quang Ninh (12 per cent). Hanoi and Ho Chi Minh City, the two key economic drivers, are tasked to grow 8 and 8.5 per cent, respectively.
This unprecedented resolution also asked chairs of people’s committees of all localities to “expeditiously design growth scenarios of sectors on a monthly and quarterly basis, and scenarios on RGDP growth in service of the government’s economic management,” to be submitted to the Ministry of Planning and Investment (MPI) this month. In addition, localities are allowed to propose specific special mechanisms to the government to remove difficulties and utilise the advantages.
According to Resolution No.02/NQ-CP released last month on key tasks and solutions for improving the business environment in Vietnam, the government will continue focusing on cutting and simplifying administrative procedures and business regulations in a practical and effective manner.
The government will also continue amending, supplementing or abolishing unnecessary administrative procedures and regulations; while banning the enactment of new inappropriate business procedures, regulations, standards, and techniques that increase costs and cause difficulties and inconveniences for people and businesses.
It will also “continue to effectively implement the overall administrative reform programme, build an effective and dynamic administration, and create a safe, transparent, low-cost, and international-standard investment and business environment.”
In the last quarter of 2024, the General Statistics Office conducted a survey over more than 29,000 enterprises nationwide operating in manufacturing and processing; construction; and commerce and service. Over 77 per cent said their performance in Q4 was better than and kept stable as compared to Q3.
The manufacturing and processing industry was the most optimistic, with nearly 80 per cent saying their performance was better than or stable compared to Q3. This was followed by the commerce and service industry (77.6 per cent), and the construction industry (73.7 per cent).
Providing more support
At the government’s meeting with enterprises last week, Prime Minister Pham Minh Chinh stated, “One of the biggest tasks now is to continue supporting enterprises.”
Figures from the Ministry of Finance showed that in 2024, total financial assistance value from exemption, reduction, and extension of payment of assorted taxes, fees, and charges, as well as land rental for enterprises and the public was estimated at $8.22 billion – including policies implemented since 2023, with exemption and reduction worth about $4.1 billion and extension of $4.12 billion.
The government has ordered the State Bank of Vietnam to make greater efforts to achieve a credit growth rate of over 16 per cent this year, higher than the rate of about 15 per cent last year.
To ensure economic growth, sufficient electricity must be ensured. “The electricity growth rate must be 12.5-13 per cent this year,” Prime Minister Pham Minh Chinh stated at a government cabinet meeting early this month. “Public investment will help boost economic growth and pull in more investment.”
The National Assembly has assigned public investment for 2025 at $36 billion. This will be used for a series of key infrastructure projects including expressways, roads, and airports, including the $16 billion Long Thanh International Airport, and the North-South High-speed Railway, with construction set to commence in late 2027 and completion set for 2035.
The economy grew 7.09 per cent in 2024 when there were more than 157,200 enterprises newly established, registered at $64.45 billion, with over a million employees registered for employment, and nearly 76,200 businesses resuming operations, raising the total to over 233,400 – up 7.1 per cent on-year.
Positive projections
Last week, the government was reported that international organisations continue offering positive assessments on the Vietnamese economic growth outlook. The United Overseas Bank (UOB) and Asian Development Bank have projected Vietnam’s growth rate at 7 and 6.6 per cent, respectively, which are high compared to the world average of about 3.3 per cent, the MPI said.
According to Standard Chartered’s latest macroeconomic update released over a week ago, Vietnam’s economy is projected to grow by 6.7 per cent in 2025. Growth is expected to moderate from 7.5 per cent on-year in H1 to 6.1 per cent in H2, driven by increased business activity and sustained foreign investment.
“Vietnam’s GDP grew 7.1 per cent in 2024, well above the government’s target of 6.5 per cent, supported by accommodative monetary policy and strong retail sales,” Standard Chartered said. “However, recent data shows a moderation, particularly in the property sector, which continues to struggle despite early signs of recovery.”
Suan Teck Kin and Peter Chia, analysts at UOB, noted that in view of the strong momentum carried over from 2024 and while considering risks and potential downside from further trade friction from the new US administration, the bank has raised its forecast for Vietnam’s GDP growth in 2025.
“We expect positive momentum from domestic drivers such as production, consumer spending, and visitor arrivals to contribute to the activities, especially in the first half. However, uncertainty on trade outlook will be a major risk for Vietnam in the second half, with its rising dependence on exports, which have grown to a record high of more than $400 billion in 2024,” they wrote.
| Andrea Coppola, lead country economist for Vietnam, Cambodia, and Laos World Bank
Vietnam has been making progress in improving institutions for many years, but additional reforms are needed to facilitate the country’s development and ensure high-income status by 2045.
The country’s decision-making system is consensus-based, and this has many positive features. It helps avoid overly hasty decisions, which can make for an unpredictable business environment. But it can also slow decision-making, even in cases where the need for change is clear.
To improve state capability, Vietnam may need to be more selective in how it intervenes in the economy. The Party general secretary’s request to abandon the “if you can’t manage, then ban” mindset is a critical innovation. Moving from a prohibition to facilitation mindset will help to reduce the number of unnecessary regulations and promote innovation, creativity, and efficiency. A flexible management mindset that fosters development will inspire agencies and civil servants to actively pursue new solutions.
Moreover, a more selective approach will ultimately mean doing less of many things, and the size of the state apparatus could shrink, which could also create efficiency savings while allowing the compensation in the public sector to catch up to that of the private sector. It is important to ensure that civil servants and public servants are compensated well to attract and retain the best talent and to motivate them. |
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| Our panellists expect GDP growth to gradually lose momentum from current levels in the coming quarters: The fading effect of front-loading sales ahead of US tariff hikes and a high base of comparison will weigh on the result later in 2025.
Accordingly, full-year economic growth is seen decelerating from 2024, hovering around the lower band of the government’s 6.5-7 per cent target range. Growth in public spending, fixed investment and exports will soften, while stronger private consumption growth will provide tailwinds.
Extreme weather events and weaker-than-expected Chinese growth are downside risks. FocusEconomics panellists see GDP expanding 6.5 per cent in 2025, and 6.3 per cent in 2026.
We see industrial production expanding 7.8 per cent in 2025, down by 0.6 percentage points from one month ago, and expanding 7.3 per cent in 2026.Source: FocusEconomics |
