Increasing domestic consumption needed to spur economic growth
Increasing domestic consumption needed to spur economic growth
Domestic consumption has rebounded positively, contributing to the 7.09 per cent economic growth recorded last year. However, consumers continue to adopt a cautious approach to spending amid ongoing socio-economic challenges.
Determined to restore the economy to a high growth trajectory, the Government issued Resolution No. 01/NQ-CP in 2024, focusing on expanding the domestic market and aiming to achieve a 9 per cent increase in total retail sales of goods and consumer service revenues. This target was successfully met, with the year’s total reaching over VNĐ6.4 quadrillion (US$251.9 billion), up 9 per cent year-on-year.
According to Đinh Thị Thúy Phương, director of the Trade and Service Statistics Department under the General Statistics Office (GSO), these results were driven by the Government's decisive measures. Key actions included stimulating consumer demand, and addressing bottlenecks facing sectors such as manufacturing, retail, hospitality, tourism, transport, and warehousing.
The Government’s policy of reducing VAT from 10 to 8 per cent on essential goods and increasing the base salary since July 1, 2024, also played a pivotal role. These measures lowered production costs, boosted profitability, and encouraged consumer spending. Notably, the 20.6 per cent increase in consumer goods imports last year reflected a robust recovery in domestic demand.
Tourism growth further fueled consumer demand. Việt Nam welcomed more than 17.5 million foreign visitors in 2024, a 39.5 per cent increase from 2023.
Despite these gains, Phương cautioned that while consumption has recovered positively and met its targets, it has yet to return to pre-pandemic double-digit growth rates.
A shift in consumption patterns is also evident. In 2024, essential goods, such as food, clothing, household items, and educational supplies, accounted for 77 per cent of total retail sales and service revenues, up from 75.3 per cent in 2019 – the year before the COVID-19 pandemic. Meanwhile, spending on non-essential services, including tourism, dining, and entertainment, decreased, indicating consumer belt-tightening to focus on necessities.
Economic experts agreed that in the short term, domestic consumption remains a critical driver of economic growth. Former GSO General Director Nguyễn Bích Lâm said at a recent seminar that final consumption accounts for approximately two-thirds of the nation’s GDP, hence its place as an important driving force behind growth.
E-commerce, in particular, has emerged as a dynamic growth sector, with the local market surpassing $25 billion in 2024, growing 20 per cent from 2023 and accounting for 9 per cent of total retail sales.
Nguyễn Anh Đức, chairman of the Association of Vietnam Retailers, said maintaining a 20 per cent annual growth rate in e-commerce over the next five years is vital to achieving the ambitious goal of double-digit GDP growth.
