According to a new forecast from the World Bank, economic growth in Vietnam is expected to reach 6.1% by the end of 2024 and 6.5% in 2025. Both forecasts are higher than what was estimated in April, with the increase in growth attributed to a rebound in manufacturing exports, tourism and investment, according to the report.
This shows that Vietnam could have bigger growth in 2025 than other emerging economies such as Thailand, Cambodia, Malaysia, Indonesia and the Philippines.
“Vietnam certainly faces some serious challenges, not least the ailing domestic sector and overreliance on the [foreign direct investment] sector, but, compared to other Southeast Asian countries, its economic prospects remain bright,” Nguyen Khac Giang, researcher and visiting fellow at the ISEAS Institute, told DW.Vietnam, like other Southeast Asian countries, relies heavily on foreign direct investment.
Between 2021 and 2023, FDI inflows into Vietnam, Thailand, Indonesia, Malaysia, Singapore and the Philippines averaged about $236 billion a year, according to the ASEAN Investment Report 2024.
As Western investors try to diversify away from China amid geopolitical tensions between the Washington and Beijing, Southeast Asian countries are becoming a top choice for foreign investment from the US, Japan and the EU.
Nguyen said Vietnam was taking advantage of those tensions.
“I think Vietnam can maintain its growth momentum due to its domestic advantage of a 100 million population with a rising middle class, while also optimizing the benefits of its geopolitical position in the great power competition between China and the US,” he said.
China has also been investing in Southeast Asia, with Beijing and Hanoi establishing their “comprehensive strategic partnership” in 2008.
Like China, Vietnam’s economic growth comes under the stewardship of a one-party system, with the Communist Party having complete control over the state’s functions, social organizations and media.
“China is Vietnam’s biggest trade partner, but, more importantly, it plays a crucial role in Vietnam’s manufacturing sector, as most of its inputs come from China. I don’t think that will change in the foreseeable future,” Nguyen said.
“China Plus One” is a global economic business strategy for investors to reduce sole reliance on market and supply chain operations in China, aiming to expand into other countries while maintaining presence in the Asian giant.
Countries in Southeast Asia are seen as suited alternatives.
Bich Tran, an adjunct fellow at the Center for Strategic and International Studies (CSIS), told DW that Vietnam is a frequent option.
“Vietnam is one of the top choices for many companies’ China-plus-one policy because of the geographical proximity and similar culture,” Tran said.
“For those who have been operating in China, moving to Vietnam is much easier, and dealing with the Vietnamese would be more familiar than dealing with Indonesia or Malaysia,” she said.
“That being said, Vietnam is much smaller than China, so it can only absorb a small number of companies who want to relocate. India, if they open up their economy, would have much better chance of competing with China than Vietnam,” she added.
What is behind Vietnam’s economic success story? – DW – 10/15/2024
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