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Vietnam is one of the fastest–growing economies in the world. The country’s economic boom is attributed to the shift in labour allocation from agriculture to the manufacturing and services sector. Vietnam also received a boost from private investment, strong tourism, higher wages, and increased urbanisation. The rapid expansion of industries, such as textile, electronics, and seafood production, propelled export numbers to new heights.
Vietnam recorded 10-year high GDP growth of 7.1% in 2018 and 7.02% in 2019. Despite the Covid-19 outbreak in 2020, the country was one of the few economies that recorded positive growth with 2.91%. Its aggressive public health measures were able to minimise the impact of Covid-19 on Vietnam’s economy.
In 2021, the Southeast Asian country’s GDP grew by 2.58%. In 2022, Vietnam registered a growth of 8.02%, the highest pace since 1997.
For 2023, the International Monetary Fund (IMF) expects Vietnam’s economy to grow by 6.2%.
Vietnam GDP Annual Growth Rate (in %)
As per IMF, the country’s population is around 99 million, making Vietnam the 15th most populous nation in the world, despite the government’s two-child policy.
Unemployment is low with 2.17% in 2021 from 2.6% in 2020. For 2022, IMF forecasted an unemployment rate of 2.4%.
Vietnam Unemployment Rate (in %)
Currency and Central Bank
The Vietnamese dong has been the country’s official currency since 1978. The dong was formerly subdivided into 10 hao. These coins have not been used since 2014 in retail, although, some banks may still accept them.
The State Bank of Vietnam serves as the country’s central bank and owns approximately 65% of Vietnam’s largest listed bank by capital, VietinBank. The central bank is responsible for the promotion of monetary stability, the formulation of monetary policies, and the supervision of financial institutions.
Inflation came in at 1.84% in 2021 after increasing to 3.23% in 2020 – from 2.79% in 2019. For 2022 and 2023, IMF is expecting inflation to stand at 3.8% and 3.9%, respectively.
Vietnam Inflation (in %)
Industry and Trade
The agriculture, industry, and services sectors are the pillars of Vietnam’s economy. It is dominated by large state-owned companies, including textiles, plastics, food, furniture, paper, tourism, and telecommunications.
Vietnam’s services sector represents 40.95% of the country’s GDP and employs 35% of the total workforce. The government’s pandemic measures last year impacted its dominant services tourism and telecommunications.
Industry makes up 37.86% of Vietnam’s GDP. The sector employs around 11.3 million people, making it the second-largest employment sector in the country. The country’s coal, hydrocarbons, electricity, cement, and steel industries have recently boomed while oil production became the third-largest in Southeast Asia. Automobiles, electronics, and computer technologies are the high–value-added industries attracting major investments.
The country’s agriculture sector contributes 12.6% of the GDP. With almost 17.73 million people, agriculture, forestry, and fisheries employ the most people among all industries. Rice, coffee, cashew nuts, corn, pepper, sweet potatoes, peanuts, cotton, rubber, and tea are among the country’s top agricultural products.
Vietnam ranks 19th globally in terms of total exports, with broadcasting equipment, telephones, integrated circuits, textile footwear, and leather footwear as its main export products. The US, China, Japan, South Korea, and Germany are the country’s top export partners.
Meanwhile, the country is 19th in total imports worldwide and its top import products are integrated circuits, telephones, refined petroleum, light rubberized knitted fabric, and semiconductor devices. Its main import partners are China, South Korea, Japan, Thailand, and Taiwan.
Vietnam economy: Balance of Trade
Stock Exchanges and Capital Markets
The Ho Chi Minh City Stock Exchange (HOSE or HSX) and the Hanoi Stock Exchange (HNX) are the two major stock exchanges in Vietnam. The Vietnam Stock Index or Vn Index serves as the benchmark of HSX and is based on the total capitalisation of all listed companies in the exchange.
In 2020, the government decided to set up the Vietnam Stock Exchange to manage HSX and HNX. While both exchanges will share certain functions, HNX will be responsible for operating the derivatives market, the bond market and the market for other securities. HSX will undertake all stock tradings.
HNX will stop listing new stocks from July 1, 2023, and switch all existing listed companies to HSX by December 31 of the same year.
Bond Market
Vietnam’s bond market has seen steady progress over the past years due to continuous initiatives by the government. While government bonds still dominate the market, municipal bonds, corporate bonds, and convertible bonds are now available.
According to the Asian Development Bank’s (ADB)’s November 2022 edition of its Asia Bond Monitor, Vietnam’s LCY bond market remains the smallest in emerging East Asia. The outstanding bond stock is at $D97.4 bn. The market expanded 21.1% in Q3 2022 (year-on-year), down from 31.4% in the previous quarter.
The decline is attributed to a decline in the government bond segment combined with a slowdown in the corporate bond segment. Corporate bonds outstanding registered a 4.1% quarter-on-quarter growth in Q3 2022, a decline from 9.5% q-o-q in Q2 2022.
Fitch Ratings affirmed Vietnam’s long-term foreign currency credit rating at BB with a
positive outlook (as of October 2022).
Real Estate Market
Vietnam’s real estate market has flourished over the years until Covid-19 put a dent in it.
While demand and supply were exceptionally low due to the Covid pandemic, residential property prices continued to rise. According to Jones Lang LaSalle’s Vietnam property market report, prime market prices for apartments were at $3,412/sqm land in Q3 2022, representing a 27.2% year-on-year increase. Apartment prices in Hanoi stood at $1,902/sqm, a 12.14% increase y-o-y.
However, the Vietnam Real Estate Association expects a recovery in the real estate market in 2023, driven by improved government regulations and economic growth forecasts. Vietnam is looking into removing legal obstacles and creating smoother cash flow in the real estate sector. As per the Vietnam Real Estate Association, “70% of the difficulties facing real estate projects spring from legal bottlenecks“.
Vietnam opened its property markets to foreigners in 2015. Foreigners with a tourist visa can purchase property in Vietnam. However, they are only allowed to own a maximum of 30% of condominium units and no more than 10% of properties in a landed project.
Source of charts: tradingeconomics.com
