Vietnam likely to grow 6.5% in 2024-2025: VinaCapital

VinaCapital, among the biggest foreign-run asset managers in Vietnam, has forecast the country’s economy to achieve 6.5% growth in both 2024 and 2025, with the composition of the expansion to change to more domestically driven factors next year.

The 6.5% growth next year would be achieved if the government were to boost both real estate market and infrastructure spending, which VinaCapital believes would make local consumers more confident to spend their money.

Meanwhile, if the government does nothing to offset slower exports to the U.S., which is Vietnam’s largest export market, next year, then GDP growth is put at 4.5%, says VinaCapital.

The fund management firm expects the extraordinary increase in Vietnam's exports to the U.S. this year to moderate next year because the U.S. economy is likely headed for a “soft landing” slowdown in GDP growth.

The resulting slowdown in Vietnam’s exports to the U.S. would, in turn, lead to a drop in manufacturing output growth. However, VinaCapital does not expect Vietnam’s exports and/or manufacturing output to shrink next year, because a steady inflow of FDI ensures that more and more factories begin producing and exporting products every year.

In another scenario where the government only boosts infrastructure in response to slowing demand for “Made in Vietnam” products, then GDP growth will be 5%.

Discussing Vietnam’s “big picture” and long-term growth, speakers VinaCapital’s annual investor conference last month reiterated that the likely drivers expected to drive Vietnam’s growth over the next decade include demographics, urbanization, education, and the digital economy.

Expecting pickup in consumer sentiment

In 2024, consumer sentiment in Vietnam remained moribund, which weighed on the country’s economic growth, although sentiment has improved somewhat as the year has progressed.

Consumption accounts for over 60% of Vietnam’s economy (versus 25% for manufacturing), so healthier consumption would easily compensate for the slower exports/manufacturing growth expected for next year.

The Vietnamese government has indicated that it will increase infrastructure spending in 2025, and hopes are high that this will also make consumers confident to increase their spending. The fund manager expects a pickup in consumer spending next year.

They expect Vietnam’s government to boost infrastructure spending and take significant steps to unfreeze the real estate market in 2025. An increase in infrastructure spending, which accounts for 5-6% of GDP, would not be sufficient to boost Vietnam’s economy or consumer confidence.

However, the combination of faster progress on infrastructure projects like Ho Chi Minh City’s new airport and Hanoi’s new ring roads could make consumers feel more confident to spend money because of the “wealth effect” of the property that many middle-income consumers in Vietnam own, said VinaCapital.

At the inauguration of the eighth session of the National Assembly on October 21, Prime Minister Pham Minh Chinh said his government targets a national economic expansion of 7-7.5% in 2025.

Vietnam is likely to attain GDP growth of 6.8-7%, higher than the parliament-mandated 6-6.5%, after reaching a higher-than-expected 6.82% in the first three quarters despite the devastating typhoon Yagi, Chinh noted.

Frederic Neumann, chief Asia economist at HSBC, said at an annual seminar last week in Hanoi that Vietnam is projected to grow 7% in 2024 and 6.5% in 2025, the fastest among ASEAN-6 countries.

Last month, Standard Chartered Bank revised up its forecast for Vietnam’s 2024 GDP growth to 6.8% from the previous 6.0%. The bank retains its 2025 forecast at 6.7%, with projected growth of 7.5% year-on-year in H1 and 6.1% year-on-year in H2.

According to S&P Global, Vietnam can top the chart among emerging markets with an average annual GDP growth of 6.2% from now to 2035.

Per the government’s projections, Vietnam’s GDP is expected to hit $500 billion in 2025, ranking 33rd worldwide, up from $433 billion and 34th position in 2023 and $346 billion and 37th in 2020.

By 2030, the national economy is expected to reach $780-800 billion, PM Chinh said last month.