Steady Economic Expansion in Vietnam Despite Challenges in Global Trade: Forecast 2025 by AREO
Rewritten Article:
Vietnam's Economic Outlook: Steadfast amid Uncertain Trade Scene
In the face of a turbulent global trade environment, Vietnam's economy is predicted to keep its growth trajectory steady in 2025 and beyond, according to the ASEAN+3 Regional Economic Outlook (AREO) 2025, unveiled by the ASEAN+3 Macroeconomic Research Office (AMRO).
During the AMRO outreach seminar, co-hosted with the Foreign Trade University (FTU) in Hanoi, Allen Ng, the AMRO's Group Head and Principal Economist underscored Vietnam's economic resilience, declaring "Vietnam continues to show remarkable resilience, with strong household spending and business investments serving as the main engines of growth despite mounting external challenges."
He pointed out that these sturdy consumption and investment activities will help Vietnam sustain growth as the external environment becomes more unpredictable due to escalating US tariff measures and rising geopolitical uncertainties.
The AREO 2025 report indicated that Vietnam, alongside several ASEAN economies, benefits from a more diversified trade structure compared to the past. While exports to the US remain significant, Vietnam has been transitioning towards regional trade, particularly with China and other ASEAN countries. This strategic shift is seen as a crucial factor contributing to a buffer against protectionist shocks triggered by the US.
However, Vietnam is not insulated from regional challenges. The report cautioned that newly announced US tariffs could disproportionately affect ASEAN+3 economies, with Vietnam and Cambodia among the most susceptible. AMRO's estimates revealed that Vietnam's effective tariffs could impact approximately 4% of its GDP, surpassing the regional average.
"Although Vietnam has managed to decrease its reliance on the US market, the intensifying trade tensions could still depress industrial production and exports," Allen Ng asserted. He emphasized, however, that Vietnam's robust domestic fundamentals, such as a resilient labor market and steady credit growth, would provide a sturdy foundation.
Turning to fiscal matters, Eung Hyun Hong, an AMRO's Fiscal Surveillance Group member, presented the ASEAN+3 Fiscal Policy Report (AFPR) 2025, which laid out the fiscal challenges and opportunities facing Vietnam.
An overview of the seminar - VNS Photo Tiến Đạt
"Vietnam's fiscal space has shrunk significantly post-pandemic, primarily due to rising public debt and high gross financing needs," Eung Hyun Hong noted. Despite improvements in fiscal balances in recent years, Vietnam's fiscal position remains comparatively weaker than before the pandemic.
According to the AFPR 2025, Vietnam's gross government debt ratio increased substantially during the pandemic and remains high. This, together with substantial financing requirements, restricts fiscal maneuverability, emphasizing the importance of prudent fiscal management. Eung Hyun Hong recommended that "fiscal consolidation efforts must continue, with careful balancing of revenue and expenditure measures to rebuild buffers and maintain debt sustainability."
While Vietnam's fiscal tightening is necessary, it must be balanced against the need to support growth given the resilience of domestic demand and ongoing structural transformation.
From a structural perspective, Vietnam's medium-term growth prospects remain favorable as long as continued improvements in productivity and structural reforms are achieved.
Mr. Byunghoon Nam, head of the discussion on the inaugural Country Fiscal Review (CFR) on Vietnam, underscored a key concern: "The declining tax-to-GDP ratio highlights weaknesses in tax administration and the need for reforms to boost revenue mobilization."
As per the CFR findings, Vietnam's fiscal decentralization system, while offering greater autonomy to local governments, also presents challenges pertaining to fiscal discipline and coordination between central and local administrations. Addressing these structural fiscal issues will be vital for ensuring the sustainability of public finances in the coming years.
Comparatively, within the ASEAN+3 region, Vietnam remains among the economies with higher growth prospects, with AMRO projecting GDP growth of around 6% in 2025 under baseline scenarios. This is above the projected ASEAN+3 average of 4.2%. Simultaneously, Vietnam shares similar vulnerabilities with its regional peers, including exposure to external shocks, demographic transitions, and the necessity of adapting to global technological changes.
In summary, amid rising protectionism and geoeconomic fragmentation, AMRO advises ASEAN+3 policymakers to adopt flexible and proactive policy stances. Vietnam, boasting a dynamic economy and strategic position, is anticipated to maintain its role as a growth engine within the region.
Việt Nam maintains steady growth outlook despite trade headwinds - VNA/VNS Photo
Enrichment Insights:- Vietnam's economy depends on robust consumption and investment activities, ultimately serving as the primary drivers of growth. The government intends to prioritize credit allocation to production sectors and short-term loans for businesses adversely affected by tariffs to sustain this momentum.- Vietnam has transitioned towards regional trade, primarily focusing on China and ASEAN countries, reducing reliance on US-centric exports. This strategic shift helps mitigate risks from US tariff measures and protectionist policies.- Proactive fiscal and monetary measures are being deployed to adapt to global uncertainties. These include extended VAT reductions, exchange rate management interventions, and preferential loan programs for infrastructure and digital projects.- The full disbursement of Vietnam's 2025 capital plan aims to bolster infrastructure and construction sectors, and stimulate domestic consumption of building materials. The tourism sector is also prioritized to stimulate service-sector growth.- Despite disagreements in projected growth rates, Vietnam's diversified trade and strategic domestic reforms position it to outperform regional peers in a challenging environment. However, concerns about global trade slowdowns and policy uncertainties are reflected in lower growth projections.
- The ASEAN+3 Macroeconomic Research Office (AMRO) has predicted that Vietnam's economy will continue its growth trajectory amid uncertain trade scenarios in 2025 and beyond, as stated in the ASEAN+3 Regional Economic Outlook (AREO) 2025.
- Allen Ng, the AMRO's Group Head and Principal Economist, highlighted Vietnam's economic resilience during an outreach seminar, arguing that strong household spending and business investments are driving growth despite mounting external challenges.
- Exports to the US remain significant for Vietnam, but the country has been transitioning towards regional trade, particularly with China and other ASEAN countries, according to the AREO 2025 report.
- Escalating US tariff measures and rising geopolitical uncertainties have made the external environment more unpredictable, but these sturdy consumption and investment activities will help Vietnam sustain growth, as noted by Allen Ng.
- The report cautioned that newly announced US tariffs could disproportionately affect ASEAN+3 economies, with Vietnam and Cambodia among the most susceptible, potentially impacting around 4% of Vietnam's GDP.
- Eung Hyun Hong, an AMRO's Fiscal Surveillance Group member, presented the ASEAN+3 Fiscal Policy Report (AFPR) 2025, which outlined the fiscal challenges and opportunities facing Vietnam.
- According to the AFPR 2025, Vietnam's fiscal space has shrunk significantly post-pandemic due to rising public debt and high gross financing needs, emphasizing the importance of prudent fiscal management.
- ai, space, and trade technologies will likely play a crucial role in adapting to global changes and maintaining Vietnam's competitiveness, as suggested in the discussions during the seminar.
- Vietnam's government needs to focus on structural reforms and addressing concerns about tax administration, fiscal discipline, and coordination between central and local governments to ensure the sustainability of public finances in the coming years.
