Domestic consumption, public investment to drive Vietnam's 2025 GDP growth: Dragon Capital exec

Domestic consumption and public investment will be the primary drivers of Vietnam's GDP growth this year, says Le Anh Tuan, head of investment at Dragon Capital Group.

Tuan made the statement at the Investor Day conference organized in Hanoi last Saturday by Dragon Capital, a leading foreign-run asset management firm in Vietnam.

He noted that 2024 laid the foundation for stable macroeconomic growth, paving the way for 2025, when the government aims to achieve double-digit economic growth.

According to Tuan, Vietnam’s exports are unlikely to see significant breakthroughs in 2025, as global merchandise trade is projected to grow by only 2-3%. Additionally, 60% of Vietnam's major export markets are expected to face difficulties.

Investment strategies must prioritize projects that promise high economic efficiency, focus on reducing waste, ensure adherence to construction timelines, and enhance productivity and technological innovation.

Administrative reforms and digitalization are also essential to achieving the double-digit economic growth target. With these policies in place, Tuan emphasized that public investment disbursement will accelerate in the second half of 2025.

Key projects are already progressing swiftly, he noted. For instance, Terminal T3 of Tan Son Nhat Airport in Ho Chi Minh City is set to be completed in the first half of 2025, and Long Thanh Airport is expected to follow the same timeline.

The 500 kV Quang Trach power line, which is 226 km long, passing through the provinces of Quang Binh, Ha Tinh, and Nghe An, was completed in September 2024. Meanwhile, the North-South high-speed railway project, with total investment of nearly $69 billion, is scheduled to begin construction in 2027. This project is anticipated to have a significant impact on the consumption and real estate market, according to Tuan.

Dragon Capital projects that public investment will be a key driver of economic growth in 2025, playing a leading role in boosting private investment. "If the private sector's confidence remains high, achieving double-digit economic growth will not be difficult," he asserted.

Two scenarios for Vietnam's economic growth

According to Tuan, Vietnam's 2025 economic growth will have two scenarios, based on the country's macroeconomic fundamentals and foreign policies, especially the Trump 2.0 trade policy.

First, if the U.S. trade policy is too drastic and the space for easing the monetary policy is narrowed, the interest rate could rise by 1-1.5 percentage points. GDP growth would then be about 6.5-7%.

However, if the U.S. policy is adjusted more selectively while the monetary policy sees its flexibility maintained with interest rates fluctuating within +/-0.7 percentage points, Vietnam's GDP growth could be from 7.5-9%.

Tuan also gave three scenarios for corporate profit growth in 2025. If trade protectionism is intensified, corporate profits in 2025 would only increase by 5-8%.

In the case of a global economic slowdown but recession avoided, if the obstacles in the Vietnamese real estate sector are resolved, helping banks confidently disburse credit, thereby improving personal consumption, corporate profits could increase by 15-17%.

In the scenario of public investment efficiency exceeding expectations, creating real momentum and confidence for the private sector, corporate profit growth could be 18-25%.

In the current context, the possibility of the stock market being upgraded by FTSE Russell and included in the emerging market group is now very high, according to Tuan.

The Dragon Capital executive forecast a 70% chance that the market will have its status upgraded from “frontier” to “emerging” in March 2025. Among the nine criteria for a status upgrade set by Russell, Vietnam has yet to meet two criteria: clearing and settlement, and the DvP (delivery versus payment) cycle.