Continued inflow of foreign direct investment, a gradual recovery in external trade and a rebound in industrial production will be three major drivers of Vietnam’s economic growth in 2024.
An FPT Securities (FPTS) report notes that Vietnam remains an appealing destination, with registered FDI rising 32% year-on-year to $36.6 billion in 2023 and disbursed FDI rising 3.5% to $23.2 billion.
Fresh FDI, in particular, jumped with 3,188 newly-licensed projects worth $20.2 billion, up 26.6% and 62.2% year-on-year, respectively. Six Asian economies – Singapore, Japan, Hong Kong, mainland China, South Korea, and Taiwan, accounted for 81% of FDI commitments during the year.
As much as $23.5 billion was committed to the manufacturing and processing sector last year, accounting for 64% of total FDI commitments, up 40% year-on-year. In the fourth quarter alone, this sector attracted $9.5 billion, up 103% from a year earlier.
However, the report also notes that once the Global Minimum Tax is in place, Vietnam’s tax incentives may be undermined, forcing the country to further improve its business environment, infrastructure, and workforce quality.
Another growth driver will be the gradual recovery of Vietnam’s major export markets like the U.S. and China, the report says, listing cooled-down inflation in the European Union as an added positive development.
Furthermore, Vietnam has either signed and is negotiating more free trade agreements with potential partners like Israel, the UAE and Mercosur (a South American trade bloc).
The FPTS report highlights the growth of key industries in the second half of 2023 as the third factor set to drive economic growth this year.
According to the International Monetary Fund (IMF), Vietnam is set to be among the world’s 20 fastest-growing economies this year, with growth estimated at 5.8%.
The FPTS report estimates Vietnam’s economic growth at 5.5-6% this year, with some concerns persisting about slow recovery of the banking and real estate sectors.