Over the years, Vietnam has continuously maintained its position as a fast-growing economy in the ASEAN bloc. In particular, the story of attracting foreign direct investment (FDI) is truly an important factor in the development of the S-shaped country.
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| Vietnam recorded impressive trade results, with broad-based growth in many key export groups. (Photo: Hoang Anh) |
In the report titled “ASEAN Perspectives – Bigger, Better and More Ahead” published in November 2024, HSBC Global Research said that from an economy with a size of 473 billion USD in 1992, ASEAN has grown strongly and reached 3.63 trillion USD in 2023.
The share of the ASEAN-6 region (including Singapore, Indonesia, Malaysia, the Philippines, Thailand and Vietnam) in global gross domestic product (GDP) increased from 1.9% to 3.5% during the same period.
For investors seeking dynamism, ASEAN is the ideal destination as the region accounts for a growing share of many global economic activities, with each economy leading in at least one sector.
Steadfast in expanding coverage
Manufacturing and exports are the two main drivers of ASEAN’s economic growth, according to HSBC experts. Since 1992, ASEAN countries have steadily removed intra-bloc trade barriers, transforming the region into a virtually borderless market. The Common Effective Preferential Tariff (CEPT) Agreement and the ASEAN Trade in Goods Agreement provide a solid foundation for the bloc to promote free trade.
From 2005 to 2010, ASEAN as a unified entity entered into free trade agreements with China, South Korea, Japan, Australia and New Zealand. Notably, the Regional Comprehensive Economic Partnership (RCEP) Agreement.
As protectionism took hold, ASEAN went in the exact opposite direction. It continued to leverage free trade to import key inputs at competitive prices, transform them into higher-value goods, and then sell them to a larger market. The strategy paid off, with ASEAN increasing its share of global merchandise exports from 6.1% in 2005 to 7.4% in 2023, surpassing Japan and South Korea combined.
In recent times, as global trade tensions – especially between the US and China – have increased, ASEAN has emerged as the leading FDI destination. This is due to the bloc’s determination to expand its coverage. It is this openness that has become the main strength of the ASEAN economy.
According to the International Monetary Fund (IMF) World Economic Outlook, over the next five years, ASEAN will not only maintain its impressive growth momentum but is also forecast to become one of the fastest growing economic blocs in the world, with an average growth rate of 4.7%. The bloc's growth is not only about scale but also about quality. The bloc will increase economic value through innovation and productivity improvement.
“ASEAN has shown its determination to innovate, absorb modern technology and know-how to help businesses sharpen their weapons while seeking larger markets for consumption. Therefore, we believe that ASEAN - with its core of intra-bloc free trade - remains resilient, continuing to grow in size and influence,” HSBC Global Research assessed.
| Vietnam will be the fastest growing economy in the ASEAN region this year, with strong growth coming from three main factors: trade, FDI inflows and public investment. |
ASEAN's fastest growing economy
In the ASEAN panorama, speaking with reporters from the World and Vietnam Newspaper, Ms. Yun Liu, economist in charge of the ASEAN market, HSBC Global Research Department, was particularly impressed with the “bright star” Vietnam. Over the years, Vietnam has continuously maintained its position as a fast-growing economy in the bloc. Vietnam’s Gross Domestic Product (GDP) growth reached 7.09% in 2024, and is expected to continue to grow steadily in the following years.
Not only that, the story of FDI has been a really important factor in Vietnam's development over the past decade. The country has become an increasingly attractive destination for many foreign investors and has good incentives to attract high-quality FDI capital flows.
A young population, many free trade agreements (FTAs), a stable currency, and low electricity prices compared to other countries in the region are factors that help Vietnam attract FDI. The S-shaped country is currently the "destination" of a series of large enterprises in the world such as Samsung, LG, and suppliers for Apple such as Foxconn, Goertek, Luxshare, Compal, Google, and Nvidia.
Vietnam has recorded impressive trade results, with broad-based growth in many key export groups. According to the Ministry of Industry and Trade, by 2024, Vietnam will be considered the world's factory with annual trade turnover increasing by 15-17%, trade scale of nearly 800 billion USD, ranking 18th among countries with large trade scale in the world.
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| Ms. Yun Liu, economist in charge of ASEAN market, Global Research Department, HSBC Bank. (Photo: NVCC) |
With these results, Ms. Yun Liu commented that Vietnam will be the fastest growing economy in the ASEAN region this year. The strong growth comes from three main factors.
First , trade. This is still one of the main growth pillars of the S-shaped country.
Second , FDI inflows. This year, HSBC believes that FDI inflows into Vietnam will continue to increase and provide strong support for economic growth. In the current context, many foreign investors, especially European investors, are looking for investment markets with strong commitments to the green transition. Thus, “green” is a very important factor in attracting more FDI inflows to Vietnam.
Third , public investment. The Vietnamese Government's efforts to accelerate the disbursement of public investment capital are an important factor in maintaining strong growth.
In addition, economist Yun Liu believes that by 2025, domestic consumption will catch up with the growth of trade, thereby creating the necessary momentum to promote stronger development of Vietnam's economy. Some policies from the Government also support this growth momentum. For example, the policy of extending the 2% VAT reduction period for the first six months of 2025. This policy helps reduce the selling price of goods and services for consumers, promote business production of enterprises, consumption of people, contributing to creating more jobs for workers...
In addition, Vietnam’s capital market has great potential. Currently, the country still relies heavily on credit to raise capital, which can increase risks when economic conditions weaken. According to Ms. Yun Liu, diversifying and expanding capital mobilization channels is very important to help strengthen Vietnam’s financial resilience. Investors hope that Vietnam’s capital market will be opened up if Vietnam is upgraded to emerging market status this year.
Of course, the uncertainty in US tariff policy could be a “dark cloud” over the world trade outlook and Vietnam cannot stay out of it. Investors may be more cautious in the short term and this could affect FDI flows into the country to some extent.
However, Ms. Yun Liu found that Vietnam’s fundamentals in the long term are still relatively solid. This will be the “anchor” that helps Vietnam stand firm in the face of instability and confidently continue writing the success story in the ASEAN region.
Source: https://baoquocte.vn/an-tuong-sao-sang-viet-nam-306070.html
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