Vietnam: Economic and Political Overview

Economic Indicators

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Vietnam is one of the fastest growing countries in the world and its economy has shown resilience to trade wars and slower growth rates in neighbouring China. This accelerated economic pace is due to labour shifting from agriculture to manufacturing and services, private investment, a strong tourist sector, higher wages, and accelerating urbanisation. Exports constitute an increasingly significant contribution to Vietnam's GDP and certain sectors, such as industrial production, textile, electronics and seafood production have been growing rapidly. Growth reached a 10-year high of 7.2% in 2019 and due to the outbreak of the COVID-19, dropped but remained in positive territory in 2020 with 2.9%, 2021 with 2.6% and then 2022 with 7%. According to the updated IMF forecasts from January 2023, GDP growth in Vietnam is expected to reach 6.2% in 2023 and 6.6% in 2024, subject to the post-pandemic global economic recovery.

According to the IMF, government debt reached 41.7% of GDP in 2020, 39.7% in 2021 and 40.2% in 2022. It is expected to stabilise at 40.5% and 40.8% in 2022 and 2023. This limited increase is a result of tightening monetary policies and limits on new government guarantees. Inflation reached 1.8% in 2021 from 3.2% in 2020, and 3.8% in 2022. It is forecast to average 3.9% in 2023 and 3.5% in 2024 by the latest World Economic Outlook of the IMF (January 2023). Diversified trade structure, rising wages and domestic consumption are the backbone of the Vietnamese economic growth. Nonetheless, labour costs remain competitive, which help attract foreign investments to the country. Economic challenges include lack of infrastructure, business climate shortcomings, pending public sector reforms, growing inequality, a weak banking system. Tax reforms and privatisation of state-owned companies helped compensate the budget deficit in 2021 which stayed below 4% of GDP (Financial Post, 2022). Around 40% of Vietnam's debt has medium or long-term maturity, a significant risk considering 40% of said debt is denominated in foreign currencies and represent a currency risk. Nonetheless, public authorities continue to intervene in both directions to keep the Dong within a narrow band against major international currencies and accrue foreign reserves.

The unemployment rate in Vietnam remains particularly low. It reached 2.7% in 2021 from 2.5% in 2020 and 2.4% in 2022. It is expected to reach 2.3% in 2022 and 2023 (IMF, January 2023). Social challenges include poverty reduction, improving higher education, and allowing freedom of the press. Transparency International ranks Vietnam as 77th out of 180 countries in its Corruption Perceptions Index 2022, from the 87th spot a year earlier.

Main Sectors of Industry

Vietnam's economy is based on large state-owned industries such as textiles, food, furniture, plastics and paper as well as tourism and telecommunications. Agriculture represented 12.6% of GDP and employs 37% of the total workforce in 2022 (World Bank, 2023). Main crops include rice, coffee, cashew nuts, corn, pepper, sweet potatoes, peanuts, cotton, rubber and tea as well as aquaculture. While agricultural trade surplus represented over 11 billion USD in 2022, the livestock industry continued to suffer from various diseases, including swine flu.

Industry contributed 37.5% of GDP and employed 27% of the total workforce in 2022 (World Bank, 2023). The energy sector has boomed in recent years (coal, hydrocarbons, electricity, cement, steel industry). Despite being a 'newcomer' in the oil industry, Vietnam has become the third largest Southeast Asian producer. The country has also invested in high value-added industries such as cars, electronic and computer technologies (software).

Services represented 41.2% of GDP and employed 35% of the total workforce in 2021 (World Bank, 2023). Main services include tourism and telecommunications.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	37.2	27.4	35.3
Value Added (in % of GDP)	12.6	37.5	41.2
Value Added (Annual % Change)	3.3	3.6	1.6

Source: World Bank - Latest available data.

 

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Monetary Indicators	2015	2016	2018	2019	2020
Vietnamese Dong (VND) - Average Annual Exchange Rate For 1 MUR	618.93	617.16	666.05	649.30	589.84

Source: World Bank - Latest available data.

 

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:

61,7/100

World Rank:

90

Regional Rank:

17

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:

6.25/10

World Rank:

46/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Foreign Trade in Figures

Vietnam is one of the most open economies to international trade in Asia. Vietnamese trade represented 186% of GDP in 2021 (World Bank, 2023). Vietnam exports transmission electronic apparatus and telephones (22% of all exports in 2021), electronic integrated circuits and microassemblies (4.3%), footwear, technology products and automatic data processing machines. Imports include electronic integrated circuits and microassemblies (14.5% of all imports in 2021), electronic apparatus, semiconductors and printed circuits (Comtrade, 2023).

The main trading partners are the United States (28.7% of all exports in 2021), China (16.7%), South Korea (6.5%) and Japan (6%). Its main providers are China (33.2% of all imports), South Korea (17%), Japan (6.8%) and the United States (4.6%). The Vietnamese economic model remains heavily dependent on foreign investment and exports, especially to the United States and China. In recent years, Vietnam has demonstrated strong commitment to trade liberalisation. It joined the WTO in 2007 and signed Free Trade Agreements (FTAs) with the ASEAN countries and the United States. Vietnam also enjoys a cooperation agreement with the EU. A free trade agreement between both parties was ratified by the European Parliament in February 2020 and is expected to enter into force soon. A Regional Comprehensive Economic Partnership (RCEP) - the world’s largest trade agreement - was signed by Vietnam in 2020, which includes 16 countries in total: Australia, Brunei, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand.

The value of exports of goods was estimated at 335.92 billion USD in 2021, up from 282.72 billion USD in 2020. The imports of goods amounted to 331.58 billion USD in 2021, up from 262.75 billion USD in 2020. The trade surplus reached 17.7 billion USD in 2021, against 30.7 billion in the previous year. Vietnam reported a 18.8% growth in exports in 2021, as it saw its trade surplus with the United States, its largest export market, widening to an all time high 94.9 billion USD in 2022 (NASDAQ, 2023). Vietnam's total exports in 2021 came in at 402.89 billion USD, while its total imports rose 26.5% to 350.98 billion USD, resulting in a trade surplus including services of 1.963 billion USD (WTO, 2023). Vietnamese trade is characterised by some geographic inequality: the country shows a trade surplus with Western countries, but a series of deficits with some of its Asian neighbours. To achieve further progress, the country must continue to increase the value of exports and achieve product diversification. 

Sources of General Economic Information

Ministries

Vietnam Ministry of Trade
Vietnam Ministry of Planning and Investment

Statistical Office

General Statistics Office of Vietnam

Central Bank

State Bank of Vietnam

Stock Exchange

Ho Chi Minh Stock Exchange
Hanoi Stock Exchange

Search Engines

Google Vietnam
Yahoo! Vietnam

Economic Portals

Vietnam Economic Portal

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