The Vietnamese Economy

Sabrina Lerskiatiphanich

Vietnam is one of the fastest growing economies in the world. The World Bank reported Vietnam’s real GDP to grow at a rate of 7% in 2019. This economic growth is faster than both China’s and India’s, which was at approximately 6% and 5% respectively in 2019. However, Vietnam’s economy is feeling the impacts of the ongoing pandemic - which does not seem to be coming to an end any time soon, decreasing its economic growth target to 2.5%. It was previously set to 5%. Whether Vietnam will be able to return to its high levels of economic growth in the near future is up for speculation. 

Vietnam’s economy is primarily driven by its agricultural, manufacturing, and tourism sectors. This composition makes it susceptible to world events. Its agricultural sector exports a lot of luxury crops: cashews, black pepper, and coffee, which sees a decrease in demand during difficult times. Although Vietnam’s early shut down of international flights offered it strong control of its coronavirus situation, its tourism sector has suffered greatly as a result. Compared to 2019, foreign arrivals were down by 98% in May. In terms of manufacturing, Vietnam focuses mainly on low-skill manufacturing, which also suffers when there are disruptions to the supply chain - the constantly changing international transport regulations due to the novel coronavirus may hit Vietnam’s manufacturing industry hard. 

Impacts from coronavirus suggest that before the pandemic is controlled on a global scale, Vietnam is unlikely to experience the same economic growth it has enjoyed in past years; and the hit to the world economy may mean Vietnam’s economic growth will still be limited post-Covid. However, Vietnam is keen to adapt: the Vietnamese government has started promoting domestic tourism in an effort to support hotels, resorts, and other tourism-related businesses, which are struggling to stay afloat. The government recently launched its “Vietnamese People Travel in Vietnam” campaign, which offers stimulus packages to businesses, and reduces prices at museums and tourist sites for domestic travellers. The country’s flat curve also means that it will be an attractive destination for international tourists when borders reopen.

Steps to protect the manufacturing industry, which accounts for nearly 16% of the country’s GDP, have also been taken. In March, engineers from Samsung were allowed into the country without undergoing the mandatory 14-day quarantine to ensure the company’s Vietnamese factories could continue operating at full-capacity. The government has also worked with businesses to boost Vietnamese PPE production for export. 

The protective measures the Vietnamese government has taken puts Vietnam’s economy in a good position to get its growth back on track. Combined with steady foreign direct investment and governmental investment in high-skill manufacturing, the Vietnamese economy may even surpass its previous years of success - we might not have seen the peak of the Vietnamese economy’s growth yet.