Việt Nam needs productivity gains, deeper capital markets to sustain growth

Việt Nam needs productivity gains, deeper capital markets to sustain growth

Việt Nam’s next stage of development will depend on improving growth quality through higher productivity, innovation, stronger institutions and the mobilisation of long-term investment.

Sacha Dray, an economist at the World Bank in Việt Nam, highlights the importance of productivity gains, stronger domestic businesses and deeper capital markets in helping Việt Nam achieve high-income status at MB Economic Insights 2026 in HCM City on November 6. — Photo courtesy of the organiser

Việt Nam must shift its growth model towards higher productivity, stronger domestic enterprises and deeper capital markets if it is to progress from upper-middle-income to high-income status, according to the World Bank.

Sacha Dray, an economist at the World Bank in Việt Nam, said the country had made remarkable progress, with gross national income (GNI) per capita rising from US$220 in 1989 to nearly US$5,000 today, lifting it from low-income to upper-middle-income status in less than two generations.

However, reaching high-income status would require a shift towards productivity-led growth.

“Growth got you to middle-income status. Productivity will get you to high-income,” Dray said at MB Economic Insights 2026, held in HCM City on November 6 under the theme “Unlocking Capital Flows and Navigating Volatility with Agility” and organised by Military Commercial Joint Stock Bank (MB).

The World Bank expects Việt Nam to remain among the world's fastest-growing economies, with annual growth projected at around 7.5 per cent or higher over the next few years, supported by a growing middle class, strong foreign direct investment and government-led reforms.

It has identified five pillars for sustainable growth: competitive domestic firms, skilled workers, productive infrastructure, efficient capital allocation and capable institutions. Dray stressed the need to strengthen domestic businesses through better access to finance, technology adoption and opportunities to move up global value chains.

Dray also highlighted the growing challenge of financing Việt Nam's development ambitions.

Total domestic investment could reach a cumulative $1.5 trillion over the next five years, more than twice the amount recorded in the previous five-year period.

Government borrowing under the 2026–30 plan is projected to be more than three times that of the previous cycle, while the government bond market currently accounts for only 19 per cent of GDP.

With domestic banks and Việt Nam Social Security facing limits on their capacity to absorb additional financing needs, borrowing costs have begun to rise.

“Việt Nam cannot rely too heavily on bank finance,” Dray said, calling for greater mobilisation of domestic savings and access to offshore capital.

He outlined three priorities for capital market development: diversifying the institutional investor base; improving pricing and market liquidity to build a credible yield curve; and strengthening market infrastructure and supervision, including reliable settlement systems, disclosure and credit assessments, to build investor confidence.

He added that progress towards investment-grade sovereign credit ratings could broaden the investor base and lower borrowing costs.

Interest rates and capital flows in 2027

Sacha Dray, an economist at the World Bank in Việt Nam, highlights the importance of productivity gains, stronger domestic businesses and deeper capital markets in helping Việt Nam achieve high-income status at MB Economic Insights 2026 in HCM City on November 6. — Photo courtesy of the organiser

At the forum, experts also discussed the outlook for interest rates, exchange rates and capital flows in 2027.

Nguyễn Tú Anh, director of policy research at VinUniversity, said liquidity and interest rates could become more favourable next year than in 2026.

He attributed the high cost of capital this year partly to intense international competition for funding, particularly as substantial investment flowed into artificial intelligence and related technologies. Rising government borrowing needs and bond yields in major economies had also pushed up global financing costs.

He expected the US Federal Reserve to have room to cut interest rates in 2027, potentially encouraging international capital to seek opportunities in emerging markets, including Việt Nam.

Stronger capital inflows could help stabilise the exchange rate, improve domestic liquidity and ease funding pressures, creating more favourable conditions for lower interest rates, he said.

Sacha Dray, an economist at the World Bank in Việt Nam, highlights the importance of productivity gains, stronger domestic businesses and deeper capital markets in helping Việt Nam achieve high-income status at MB Economic Insights 2026 in HCM City on November 6. — Photo courtesy of the organiser

Võ Trí Thành, director of the Institute for Brand and Competitiveness Strategy and a member of the Prime Minister's advisory council, shared Anh's cautiously positive outlook but stressed that the prospects would also depend on domestic economic conditions.

He said easing global inflation and slower increases in energy prices could reduce external pressures, but Việt Nam's high dependence on international trade and capital flows left it vulnerable to global economic and financial fluctuations.

Domestically, rapid credit expansion without corresponding improvements in capital efficiency could create additional inflationary and exchange-rate pressures.

He stressed that the priority should not simply be to mobilise more capital, but to ensure funding flowed into productive sectors rather than being concentrated in property speculation and other activities with limited spillover effects.

Developing capital markets, improving transparency and strengthening credit ratings would be essential to attracting long-term domestic and international investment.

Trần Minh Đạt, MB Deputy General Director, said interest rates were influenced not only by banks' decisions but also by inflation, liquidity and the overall demand for capital in the economy. Sustainable interest rate reductions therefore would require macroeconomic stability, inflation control and a sound balance between credit growth and banks' funding capacity.

For businesses, high interest rates would increase borrowing costs and affect repayment capacity. A company might be able to meet its debt obligations at 8 per cent per annum but would face much greater difficulties if the rate rises to 12 per cent, potentially increasing the risk of non-performing loans.

Banks therefore needed to introduce appropriate support measures rather than applying across-the-board interest rate cuts.

He reaffirmed MB's commitment to working alongside businesses through financial solutions designed to improve operational efficiency and competitiveness.

Meanwhile, Nguyễn Anh Sơn, director general of the Import-Export Department under the Ministry of Industry and Trade, said Việt Nam's trade sector had demonstrated resilience despite mounting pressures from higher supply-chain costs and volatile energy prices.

In the first 10 months of 2026, exports reached nearly $500 billion, up 27.5 per cent year on year, with the US remaining the country's largest export market.

Imports exceeded $511 billion, up 37.4 per cent, driven largely by raw materials, machinery and equipment for production and business operations rather than domestic consumption. These imports play an important role in maintaining production capacity and driving economic growth, Sơn said. 

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