Public investment key catalyst for domestic consumption, private investment in Vietnam: experts

Public investment is a top driving force of Vietnam's economic growth amid uncertainties related to inflation, interest rates and exchange rates under the global impact, according to experts.

"Focusing public investment on infrastructure to create a foundation for domestic consumption and private investment is a strategic and appropriate policy that drives growth momentum," said Dang Nguyen Truong Tai, investment director of Dai-Ichi Life Vietnam Fund Management Company (DFVN).

Tai told a recent talk show, the Finance Street, that the real value of public investment lies not in the absolute amount disbursed but in its role as a catalyst.

"Public investment's impact should be measured by its ability to influence, support, and stimulate other key sectors, laying the foundation for sustainable economic growth," he said, citing that in the first 11 months of 2024, public investment disbursement reached VND572 trillion ($22.48 billion), reaching 73.5% of the plan, up 2.4% year-on-year.

Tran Thang Long, director of analysis at BIDV Securities JSC (BSC), shared a similar perspective, emphasizing the significant contribution of public investment to economic development, especially in countries like Vietnam where infrastructure still requires substantial investment.

According to economic theory, a 1% increase in public investment typically results in a proportional increase in GDP growth for that year. However, the more critical outcome is that public investment establishes robust infrastructure, enabling other sectors to thrive in both the current and future years, Long noted.

"Starting in 2025, public investment will play an increasingly pivotal role in ensuring Vietnam’s economic stability and growth," he added.

Tai echoed these sentiments, suggesting that with an ambitious GDP growth target of 8% in 2025, public investment is indispensable for achieving the goal.

He argued that the outlook for Vietnam’s stock market depends on two core factors: corporate profit growth, which enhances valuations, and broader contributions from various industries.

"While the market has historically been driven by sectors like banking and real estate, more balanced growth, including contributions from consumer goods, construction materials, and utilities, will strengthen investor confidence," Tai noted.

Industries directly benefiting from public investment, such as construction and building materials, have already seen some gains. However, public investment also sets the stage for accelerated domestic consumption and private investment, indirectly benefiting related industries. These sectors are typically characterized by strong financial health, low debt levels, solid profitability, and attractive valuations, according to Tai.

BIDV Securities chief analyst Long added that public investment policies create spillover effects for other sectors, including infrastructure, industrial park real estate, and logistics.