Japan has nearly 5,000 valid FDI projects in Vietnam with a total registered investment capital of nearly 70 billion USD.
Attractive market in the eyes of international organizations
Within the framework of the Spring Annual Meetings of the International Monetary Fund (IMF) and the World Bank (WB) taking place in Washington DC (USA), Head of the IMF's Vietnam Macroeconomic Advisory and Monitoring Delegation, Mr. Paulo Medas, shared with VNA reporters that Vietnam is an attractive destination for foreign direct investment (FDI) in the context of global economic fluctuations and increasing geopolitical instability. IMF experts assessed that in the context of the supply chain shifting to Asia, Vietnam continues to be one of the attractive markets, attracting a large amount of FDI thanks to its stable investment environment, high economic growth, large domestic market and young human resources.
Previously, the International Monetary Fund forecast that Vietnam's gross domestic product (GDP) by purchasing power parity (PPP) would reach nearly US$2,343 billion by 2029, surpassing Australia and Poland, ranking 20th in the world. However, to maintain its attractiveness, Vietnam needs to continue improving its business environment, reducing administrative procedures, developing infrastructure, especially green energy, and promoting innovation.
The World Bank's latest 6-month economic update, Take Stock, released last week, also forecasts that Vietnam's economy will grow by 5.5% in 2024 and gradually increase to 6.0% in 2025. According to the WB, after experiencing a slowdown in 2023, the economy is showing some signs of recovery in early 2024. Exports are recovering, and domestic private consumption and investment are also gradually increasing. In addition, the real estate sector is also expected to recover more strongly later this year and next year, boosting domestic demand as investors and consumers gradually regain confidence.
Meanwhile, the Asian Development Bank (ADB) is more optimistic, expecting Vietnam’s economy to grow by 6.0% in 2024 and 6.2% in 2025. According to ADB, weak global demand and high international interest rates have affected Vietnam’s growth in 2023. However, a rapid shift to growth-supportive monetary policy and large-scale public investment are among the key measures taken to sustain growth recovery. A relatively comprehensive recovery in export processing industries, services and stable performance in the agricultural sector are expected to support Vietnam’s recovery.
In South Korea, according to an article published in the Donga Ilbo newspaper, Vietnam is being considered a "next-generation factory" and a developing market to replace some other markets, becoming an advanced research and development (R&D) center. The article pointed out that Vietnam's R&D competitiveness has benefited from changes in government policy. The Vietnamese government aims to go beyond the previous "Made in Vietnam" model, which was limited to the role of a processing base, to become a manufacturing center with its own technology and production capacity and is stepping up efforts to promote the information and communications technology (ICT) sector.
Strategic destination for foreign businesses
Workers of Samsung Electronics Vietnam Co., Ltd. located in Yen Binh Industrial Park (Dong Tien ward, Pho Yen town, Thai Nguyen province) produce smartphones.
Not only international organizations, many foreign enterprises have also had very positive assessments of Vietnam's economy. Most recently, the US technology corporation Apple announced that it would increase spending on supply chain partners in Vietnam, which is considered a key production center. This announcement was made when Apple CEO Tim Cook paid a two-day visit to Vietnam, starting from April 15. According to Apple's announcement, Vietnam is one of the top 5 countries in the world in mobile game production. Mr. Cook said Apple is committed to continuing to strengthen connectivity in Vietnam.
Previously, in March 2024, General Director of Samsung Vietnam Complex Choi Joo Ho said that in 2023, Samsung invested an additional 1.2 billion USD, bringing the total investment capital in Vietnam to 22.4 billion USD. Samsung committed to continue investing an additional 1 billion USD each year in Vietnam. Samsung's R&D Center currently has 2,400 engineers working, of which Vietnamese engineers are the "core" force in researching artificial intelligence (AI) features in the new Galaxy S24 phone line, highly appreciated by Samsung Group for their capacity.
A newly released report by Singapore-based UOB Bank maintains its growth forecast for Vietnam this year at 6%. UOB said that "the outlook for 2024 is positive although risks remain". Challenges include the Russia-Ukraine and Hamas-Israel conflicts that could disrupt global trade and energy and commodity markets. In return, grounds for optimism about growth in the coming quarters include a recovery in semiconductor demand, stable growth in China and the region, the possibility of monetary policy easing by major central banks as well as favorable shifts in supply chains for Vietnam and ASEAN.
Previously, in the article “ASEAN Digital Economy Outlook”, HSBC experts said that ASEAN’s digital economy is entering a new bright phase, in which Vietnam has become a leading market in the digital industry for domestic and foreign enterprises. Ms. Amanda Murphy - Head of Corporate Banking, South and Southeast Asia, HSBC Asia Pacific said that Vietnam’s digital economy will grow the fastest in ASEAN in 2022, 2023 and is expected to maintain this position until 2025. Vietnam is also forecast to have 67.3 million smartphone users by 2026, accounting for 96.9% of Internet users.
Fiscal stimulus for growth
Mr. Shantanu Chakraborty, ADB Country Director for Viet Nam, shared that Viet Nam's economy is expected to grow at a solid pace this year and next year, despite a challenging global environment. "However, global geopolitical uncertainties and domestic structural constraints could weigh on this outlook. Therefore, policy responses in 2024 will need to combine short-term growth support measures to boost domestic demand with longer-term structural measures to promote sustainable growth."
ADB representatives noted that to boost growth, Vietnam needs stronger measures to address domestic structural weaknesses such as heavy dependence on FDI enterprises on export processing industries, weak linkages between export processing industries and the rest of the economy, immature capital markets, over-reliance on bank credit, as well as complex legal barriers for businesses.
Mr. Nguyen Ba Hung, ADB Chief Economist in Vietnam, noted that there is not much room left for monetary policy and interest rate cuts. In the context of limited monetary policy space, fiscal spending and investment will be the key to growth in 2024.
In line with this view, the latest World Bank report also highlights the importance of fiscal policies to strengthen Vietnam’s economic recovery. The report recommends accelerating the implementation of infrastructure investment projects financed by public resources. This will help stimulate the economy, with a potential GDP growth of 0.1 percentage points for every 1 percentage point increase in public investment as a share of GDP.
“Investing in public infrastructure projects creates many long-term benefits in addition to immediate economic stimulus,” said Sebastian Eckardt, World Bank Director for East Asia and the Pacific for Macroeconomics, Trade and Investment.
Eckardt also said: “Efforts to strengthen public investment management will also address critical infrastructure bottlenecks in energy, transport and logistics, which are the foundation for Vietnam’s long-term economic growth.”
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