Vietnam’s economic development to 2025: Two optimistic scenarios

09:05 | 20/01/2020 Society

(VEN) - With an average gross domestic product (GDP) growth of about 6.84 percent for the 2016-2020 period, Vietnam will enter the 2021-2025 period with rosy prospects.

two optimistic scenarios

According to the National Center for Socioeconomic Information and Forecast, Vietnam’s participation in new-generation free trade agreements, such as the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will have a profound impact on Vietnam’s economy in the 2021-2025 period. The two agreements include a wider range of commitments compared to other trade pacts, as they cover imports and exports and set production methods for goods exchanges.

The director of the National Center for Socioeconomic Information and Forecast, Tran Thi Hong Minh, said the EVFTA and CPTPP could increase Vietnam’s GDP growth by 4.3 percent and 1.3 percent by 2030, respectively. Vietnam’s export turnover to the EU is expected to surge 44.4 percent by 2030, and to CPTPP member countries by 14.3 percent by 2035, Minh said.

The two trade pacts will also help increase investment in Vietnam in order to take advantage of commitments on rules of origin, improving Vietnam’s supply chains. The EVFTA and CPTPP will also positively affect the labor market, especially in labor-intensive sectors, such as garment and textile, leather and footwear. The trade deals will exert influence on the Vietnamese economy in the mid-and long-terms as they put pressure on the government to improve institutions and the business environment, Minh said.

According to the National Center for Socioeconomic Information and Forecast, Vietnam’s growth model does not show a clear change in the 2016-2020 period, and is still largely dependent on capital. The economic structure has shifted too quickly into the service sector, while the industrial base remains weak. Support industries have developed slowly, services with high added value make modest contributions to growth, while logistics costs remain high. Exports still depend on foreign-invested enterprises.

The National Center for Socioeconomic Information and Forecast has drawn up two scenarios for the country’s economic development in the 2021-2025 period. In the first scenario, which is the most likely, Vietnam’s economic growth is forecast to reach about seven percent and inflation will stand at a moderate rate of 3.5-4.5 percent per year. Labor productivity will be improved with an annual growth rate of about 6.3 percent. GDP per capita is expected to reach about US$4,688, meaning that Vietnam will join the rank of upper middle-income countries by 2025.

In another scenario, Vietnam’s GDP could expand 7.5 percent if the country can take advantage of the fourth industrial revolution, improve quality of investment and develop a modern economy.

Authorities need to accelerate institutional reform, improve the investment environment, promote the development of the private sector, strengthen scientific and technological application, and enhance labor productivity.

Tue Minh