Multiple drivers support Vietnam’s economic growth

Multiple drivers support Vietnam’s economic growth

Hoang Van Cuong, a member of the National Assembly (NA) delegation from Hanoi and NA Finance-Budget Committee, highlights the supporting factors behind Vietnam's economic growth and suggests measures to stimulate consumption and encourage private investment.

NA deputy Hoang Van Cuong

What will be the key growth drivers in the second half of the year that will help to achieve the government’s 8 per cent GDP growth target?

The government is pushing hard to meet the 8 per cent GDP growth target this year. Looking at economic performance in 2024 and the first quarter of 2025, the economy appears to be on a solid recovery path. With this momentum, reaching the 8 per cent growth goal in 2025 seems to be within reach.

However, changes in US tariff policies are shifting the global trade landscape, and given Vietnam's heavy reliance on exports, the impact is considerable.

This is evidenced by the Purchasing Managers’ Index (PMI), which fell to 45.6 in April, down from 50.5 in March.

To reach the growth target, Vietnam must first mitigate the negative effects of trade policy shifts on its export sector, the backbone of the economy. In addition to ongoing negotiations with the US, diversifying export markets and expanding current ones will be crucial.

Given current challenges, the government should also consider introducing export incentive policies, particularly for industries that need support at this time.

Alongside export support, protecting the domestic market is equally important, especially in preventing counterfeit goods, imitations, and smuggled imports.

Higher US tariffs pose a risk of increased smuggled goods flooding into Vietnam. The government’s strong stance on cracking down on these issues is a positive sign. Without resolute action, domestic production will struggle.

What about the other pillars, investment and consumption?

Domestic consumption has been recovering, but not strongly enough. To hit the 8 per cent growth target, further demand stimulus policies are needed. During the ongoing National Assembly session, lawmakers are expected to approve a continued reduction in VAT. Additionally, I believe the proposed increase to the special consumption tax should be postponed.

In my view, the most effective measure to boost consumption right now is to focus on tourism. International tourist arrivals to Vietnam have surged steadily, and many localities have invested significantly in tourism infrastructure, helping attract more visitors.

To better stimulate tourism, the government should consider a more open visa policy, including reducing or waiving visa fees, shortening processing times, and piloting visa exemptions in selected regions.

Localities buoyed with tourism potential could develop their nighttime economies, and ensure a more relaxed regulatory environment with lessened procedure burdens.

As for the investment pillar, the government has been resolute in speeding up public investment disbursement. Further action, however, is required to unlock private investment, which can drive faster growth.

Which sectors have strong potential to attract private domestic investment?

At this point, the sector drawing the most capital and delivering the highest multiplier effect is real estate. The realty market is currently characterised by high demand and limited supply, suggesting ample room for expansion.

According to the Ministry of Finance, about 2,200 stalled real estate projects, with total registered investment approximating $236 billion, are stuck due to legal bottlenecks. Unlocking these through clear legal mechanisms would release significant capital and create a strong growth impulse.

Furthermore, policy initiatives on affordable housing have been or are being approved, and they are expected to soon take effect, contributing positively to aiding economic momentum.

In addition, the swift implementation of a resolution on private sector development, along with the government’s public procurement policies to facilitate major projects, are helping channel private capital and accelerate public investment disbursement.

In summary, numerous factors are converging to support economic growth. With sufficient effort and timely policies, Vietnam is within reach of achieving the 8 per cent GDP growth target for 2025.

VIR