In the first quarter of 2024, Vietnam’s economy marked a significant milestone, achieving the highest GDP growth for the same period in the years 2020-2023. The nation saw a robust 5.66% increase in its economy, surpassing the growth rates of the previous years.
The industry and construction sectors emerged as the primary contributors to this economic surge, registering a 6.28% growth and contributing 41.68% to the national GDP. This remarkable performance was largely attributed to the government’s strategic emphasis on public investment.
Additionally, the service sector, bolstered by a concerted effort to enhance tourism and trade, expanded by 6.12%, now representing over half of Vietnam’s GDP growth at 52.2%. Meanwhile, the agriculture, forestry, and fishery sectors are also on an upward trajectory, albeit at a slower growth rate of 2.98%.
Manufacturing has been a pivotal force in propelling Vietnam’s economic growth. The processing and manufacturing sector experienced a 6.98% surge, contributing 1.73 percentage points to the overall growth. Furthermore, the electricity production and distribution sector witnessed an impressive 11.97% growth, adding 0.45 percentage points. Additionally, the water supply, waste management, and wastewater treatment sectors grew by 4.99%, contributing 0.03 percentage points.
Since the Doi Moi economic reforms initiated in 1986, manufacturing has become integral to Vietnam’s export-driven economy. The country’s strategic location in Southeast Asia, stable political environment, and cost-effective labor force have established it as a burgeoning manufacturing hub. Benefiting from the global shift of manufacturing bases from China, Vietnam is now a preferred destination for international companies seeking new production locations.
Vietnam’s robust economic relationships with developed countries such as South Korea and the United States, along with favorable government policies and incentives, have been key in attracting major corporations like Samsung, Apple, Intel, and Nvidia to set up or expand their manufacturing facilities. This influx of foreign investment is a major driver of growth for Vietnam’s manufacturing sector, with expectations for continued expansion in the future.
In the service sector, trade activities flourished, and tourism experienced a robust recovery, thanks to favorable visa policies and successful tourism promotion efforts.
The first quarter of 2024 saw a growth rate of 5.66%, surpassing the 3.41% growth of the corresponding quarter in 2023. However, this figure fell short of Bloomberg’s projection of 6.3% and represented a slight decline from the previous quarter’s 6.72% growth. The deceleration in growth is partially due to reduced production in the smartphone and automobile sectors.
Investment continues to be a key driver of Vietnam’s economic expansion. The country has seen a 5.2% increase in social investment capital, reaching 613.9 trillion VND at current prices. Foreign direct investment is also on the rise, with $4.63 billion realized in the first quarter of 2024, marking a 7.1% increase compared to the previous year.
Despite ongoing inflationary pressures, with a 3.77% rise in the Consumer Price Index and a 2.81% increase in core inflation, experts like Dr. Can Van Luc of BIDV bank remain hopeful that Vietnam will meet its GDP growth goal of 6-6.5% for the year.
Prime Minister Pham Minh Chinh has addressed the issue of potential power shortages, reassuring investors that the government is increasing coal imports to avoid the previous year’s difficulties. This is supported by data from the General Statistics Office of Vietnam, which shows an 11.4% increase in electricity production in the first quarter, reaching 65.5 billion kWh.
The introduction of four new laws related to land use, real estate, housing, and credit institutions is expected to have a positive impact on the market from 2025 onwards, with early reactions to these changes being positive.
The government’s ability to manage public debt, budget deficits, and financial commitments within the National Assembly’s targets provides room for potential additional economic stimulus measures if needed.