Domestic factors to drive Vietnam's GDP growth in 2025: VinaCapital
Vietnam's exports to the US have promoted GDP growth this year. (Photo: VNA) |
HCM City - While Vietnam's exports to the US have bolstered GDP growth this year, domestic factors, including the Government’s increasing spending on infrastructure, real estate market recovery, and consumption, will help the country maintain its economic expansion at around 6.5% in 2025, according to the latest report from VinaCapital.
In the “Looking Ahead to 2025” report, Chief Economist and head of Market and Research at the investment management firm Michael Kokalari highlighted that Vietnam’s exports to the US surged by more than 20% this year, primarily driven by a 40% increase in electronics and high-tech products, marking a significant recovery from the 10% decline in 2023. However, the extraordinary increase in exports to the US is expected to moderate next year, partly due to the anticipated “soft landing” economic slowdown in the market.
Additional reasons to expect slower export growth next year are related to the US inventory re-stocking cycle. Furthermore, exports across Asia are currently being boosted by “pull-forward” demand in the lead-up to Donald Trump taking office – that will lead to lower demand next year. Consequently, Vietnam’s manufacturing output growth will likely drop in 2025, as most manufactured products are destined for foreign markets.
Despite these headwinds, VinaCapital expects Vietnam will achieve 6.5% GDP growth in 2025, with growth drivers shifting more toward domestic factors.
The firm notes that weak consumer sentiment has impacted Vietnam's economic growth in 2023 and 2024, though some improvement was observed this year. Real retail sales growth is estimated at 6% for 2024, which lags below Vietnam's typical 8-9% growth rate. Moreover, about half of the projected growth is attributable to the continued recovery of foreign tourist arrivals from 70% of pre-COVID levels in 2025 to 100% this year.
The VinaCapital expert held that consumption accounts for over 60% of Vietnam’s economy so healthier consumption growth would easily compensate for slower growth in exports/manufacturing/tourist arrivals next year. The Vietnamese Government has indicated that it will increase infrastructure spending in 2025, and hopes are high that this and other measures will also make consumers more confident to increase their spending.
“We anticipate a pickup in consumer spending next year for a different reason: we expect Vietnam’s Government to take significant steps to unfreeze the real estate market”, he said.
A modest increase in infrastructure spending, accounting for 6% of GDP, would not sufficient to significantly boost the Vietnamese economy. However, the combination of faster progress on such projects as HCM City’s airport and Hanoi’s new ring roads, coupled with real estate market revival, would make consumers feel more confident to spend money because of the “wealth effect” linked to the value of the property that many middle-income Vietnamese consumers own.
The National Assembly set a 2025 growth target of 6.5-7%, with aspirations of reaching 7-7.5%. The Government has recently announced multiple measures to boost the economy, including increasing infrastructure spending and serious reforms.
VinaCapital believes that concrete measures will be required to offset the expected drags on 2025 GDP growth.
The firm expects manufacturing growth to drop from 10% this year to 6% next year, which would knock about 1% point off the GDP growth. Meanwhile, the expansion of foreign tourist arrivals is expected to fall from 40% this year to 15% next year, which would knock more than 1.5% points off the GDP growth.
The Government says it will ramp up infrastructure spending to support economic growth in 2025 while strengthening the country’s long-term growth prospects.
VinaCapital holds that infrastructure spending will grow 15-20% to 31 billion USD in 2025 on projects like completing additional 1,000 kilometres of highways, the first phase of the Long Thanh International Airport in the southern province of Dong Nai, and expansion of the two current airports in Hanoi and HCM City.
It is possible that 2025 will be somewhat volatile for Vietnam’s economy and stock market. In the first half of 2025, falling export growth will likely deal a bigger blow to Vietnam’s GDP growth than many economists expect. That dip would probably prompt aggressive the Government’s actions to support the economy, especially in light of the very ambitious GDP growth targets. The net result could be subdued growth at the beginning of 2025, followed by a strong acceleration towards the end of 2025, according to Kokalari./.
See also
New FTas boost development of foreign markets for Vietnamese goods
16:42 | 23/12/2024 Economy
2024 economic growth propels Vietnam into its “Rising Era”
16:34 | 23/12/2024 Economy
Organic textiles produced in Vietnam
16:25 | 23/12/2024 Economy
Vietnamese aviation achieves high USOAP-CMA ratings in the region
16:08 | 23/12/2024 Economy
Year-end stimulus expected to boost economic growth
15:37 | 23/12/2024 Economy
See more news
Vietnam – Italy trade cooperation promises bright prospects in 2025: Trade counsellor
15:08 | 23/12/2024 Economy
PM urges concerted efforts for economic growth of at least 8% in 2025
15:00 | 23/12/2024 Economy
UAE a vital market of Vietnam in Middle East: Ambassador
14:56 | 23/12/2024 Economy
E-commerce leads digital transformation in businesses
16:53 | 22/12/2024 Economy
Industrial parks to go green, adopt sustainable models: forum
10:12 | 22/12/2024 Economy
PM urges Da Nang to lead Vietnam’s economic transformation
09:53 | 22/12/2024 Economy
Viet Nam back as ASEAN’s growth star: HSBC
16:02 | 21/12/2024 Economy
Global coffee production to surge on Vietnam, Indonesia’s rebounding output: USDA
13:02 | 21/12/2024 Economy
Vietnam, China’s special administrative region strengthen trade links
12:31 | 21/12/2024 Economy
Vietnam, China’s Hong Kong strengthening economic collaboration
16:57 | 20/12/2024 Economy
HGS affirms ground service quality in aviation sector
17:19 | 23/12/2024 Companies
Banking sector: Capital flows with no congestion
17:13 | 23/12/2024 Finance-Banking
VAECO contributes to elevating Vietnamese aviation brand
17:11 | 23/12/2024 Vietnamese Brands
Amended Electricity Law proves MoIT’s institutional improvement success
17:06 | 23/12/2024 Policy
FTAs enhance Vietnam-China trade growth
17:02 | 23/12/2024 Cooperation
Multimedia
Glorious tradition of the Vietnam People's Army
08:30 | 22/12/2024 Infographic
Total FDI registered in Vietnam hits 31.4 billion USD in January-November
09:02 | 17/12/2024 Infographic
First 11 months of 2024: Import-export turnover increases 15.4%
10:55 | 16/12/2024 Infographic
11-month agro-forestry-fishery exports exceed yearly target
19:55 | 15/12/2024 Infographic
Hanoi achieves or exceeds 23/24 socio-economic targets for 2024
08:57 | 13/12/2024 Infographic
Amended Electricity Law proves MoIT’s institutional improvement success
17:06 | 23/12/2024 Policy
Ministry proposes extending agricultural land tax exemption through 2030
15:06 | 23/12/2024 Policy
Gov't targets to gradually make English second language at schools by 2030
15:45 | 21/12/2024 Policy
Nine newly-adopted laws made public
16:42 | 20/12/2024 Policy
Success story behind 500kV Circuit-3 transmission line project
16:43 | 23/12/2024 Energy
Ministry proposes incentives for renewable energy projects
16:17 | 20/12/2024 Energy
The Era of Advancement for Vietnam Industrial Park
17:15 | 19/12/2024 Industry
Vietnamese coffee sector working to meet EU Deforestation Regulation
16:38 | 18/12/2024 Industry
Nghe An Southeast Economic Zone aims to attract 1 billion USD in FDI in 2025
12:33 | 21/12/2024 Investment
Boeing aims to expand investment and cooperation in Vietnam’s defense sector
17:00 | 19/12/2024 Investment
Can Tho attracts non-state investment
10:21 | 17/12/2024 Investment
FDI remains vital contributor to boost economic growth
09:06 | 13/12/2024 Investment
Banking sector: Capital flows with no congestion
17:13 | 23/12/2024 Finance-Banking
Year-end surge in property bond issuance amid financial challenges
09:39 | 20/12/2024 Finance-Banking
Vietcombank named most valuable brand in Vietnam
16:43 | 18/12/2024 Finance-Banking
Many banks increase deposit interest rates in year-end period
16:56 | 16/12/2024 Finance-Banking
Vietnam likely to face continued turbulent weather systems in 2025
14:26 | 19/12/2024 Environment
Nature-based projects help Mekong Delta fight climate change
16:31 | 18/12/2024 Environment
11 rare monkeys released back into wild in Nghe An
09:27 | 18/12/2024 Environment
Master Plan on Sustainable Exploitation and Use of Coastal Resources announced
11:26 | 16/12/2024 Environment
Contracts worth 286.3 million USD inked at Vietnam Int’l Defence Expo 2024
17:02 | 22/12/2024 Science - Technology
Vietnam can partner with UK in developing nuclear power: Expert
12:43 | 21/12/2024 Science - Technology
Vinaphone launches fastest 5G service in Vietnam
12:38 | 21/12/2024 Science - Technology
Vietnam cooperates with Google to launch “Official Government Apps" feature
17:13 | 20/12/2024 Science - Technology
30-day free rides on 17 bus routes connected to Metro Line 1
16:14 | 23/12/2024 Society
Bac Ninh: 28 additional 4-star-rated OCOP products
23:24 | 22/12/2024 Society
HCM City’s first metro line launched after years of delay
16:47 | 22/12/2024 Society
Aviation sector strengthens smuggling, commercial fraud and counterfeit goods control
09:49 | 22/12/2024 Society
VAECO contributes to elevating Vietnamese aviation brand
17:11 | 23/12/2024 Vietnamese Brands
Petrovietnam keeping national “energy flame” ever burning
16:17 | 23/12/2024 Vietnamese Brands
Vietnamese products crave out a niche in UK market: Official
15:26 | 23/12/2024 Vietnamese Brands
Viettel's hi-tech products meets standards for supply to Malaysia
13:19 | 21/12/2024 Vietnamese Brands
Fireworks to light up sky over Hanoi on New Year celebration
15:13 | 23/12/2024 Culture
Vietnam’s high-end fashion targets Chinese market
10:04 | 22/12/2024 Culture
Enduring tradition of Ha Nhi ethnic minority group's costumes
13:14 | 21/12/2024 Culture
Legendary band Boney M to thrill Vietnamese audiences this Christmas
14:49 | 17/12/2024 Culture
Vietnam a green, attractive destination
16:30 | 23/12/2024 Tourism
Mekong Delta tourism continues to surge
15:21 | 23/12/2024 Tourism
Ben Thanh-Suoi Tien metro line - catalyst for HCM City's tourism development
15:17 | 23/12/2024 Tourism
Overseas tourism promotion: Breakthrough in market connectivity
14:46 | 23/12/2024 Tourism