Vietnam is one of the fastest–growing economies in the world. The countries 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 by 7% in 2019. Despite the Covid-19 outbreak in 2020, the country was one of the few economies that recorded positive growth with 1.6%. Its aggressive public health measures were able to minimise the impact of Covid-19 on Vietnam’s economy. Its GDP is predicted to return to high levels in the next two years.
The Vietnam economy is expected to recover fast and record GDP growths of 3.8% this year and 6.6% in 2022 according to the International Monetary Fund (IMF).
Vietnam GDP Annual Growth Rate (in %)
However, the normalisation of its economic activities still depends on the post-pandemic global economic recovery. GDP per capita remained around $3,000 and is expected to increase to $4,000 by 2022.
As of 2020, the country’s population is at around 97 million, making Vietnam the 15th most populous nation in the world, despite the government’s two-child policy. While Hanoi is Vietnam’s capital, Ho Chi Minh City (formerly Saigon) is the country’s most populated city.
Unemployment is very low despite a slight uptick in 2020 to 3.3% from 2.2% in 2019. However, the IMF expects the country’s unemployment to decline to 2.7% by 2021 and 2.4% by 2022.
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.
Government debt increased from 43.4% of the GDP in 2019 to 46.6% in 2020. However, a limited increase to 47.1% and 47.2% is expected in 2021 and 2022, respectively, due to tightening monetary policies and limits on new government guarantees. Meanwhile, inflation is expected to average at 4% in 2021 and 2022 after increasing to 3.8% in 2020 from 2.8% in 2019.
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 41.6% 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.
The industry sector makes up 34.5% of Vietnam’s GDP and provides jobs to 28% of the labour force. Recently, the country’s coal, hydrocarbons, electricity, cement, and steel industries have 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 to 14% of the GDP while employing 36% of the total workforce. Rice, coffee, cashew nuts, corn, pepper, sweet potatoes, peanuts, cotton, rubber, and tea are among the country’s top agricultural products.
Vietnam ranks 20th 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 20th 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
Survey and Rankings
Vietnam improved its overall score from 68.6 in 2019 to 69.8 in 2020 in the World Bank’s 2020 Ease of Doing Business 2020. However, the country slid down by one spot from 69th to 70th out of 190 countries. It is currently in the 8th spot among countries in East Asia and the Pacific region.
Meanwhile, Vietnam took a big leap from 105th freest in 2020 to 90th in 2021 in the Heritage Foundation’s Index of Economic Freedom. The country improved its overall score by 2.9 points from 58.8 to 61.7. It also crossed categories from “Mostly Unfree” to “Moderately Free.”
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 the same year.
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) latest edition of its Asia Bond Monitor, the country’s bond market grew by 19.0% year-on-year in the first quarter of 2021. However, its local currency bond market slightly fell by 0.3% quarter-on-quarter.
Government bonds comprised 82.1% of Vietnam’s bond market while the remaining 17.9% are corporate bonds. Corporate bonds more than doubled in Q1 2021.
Real Estate Market
The manufacturing boom has greatly influenced Vietnam’s local real estate market. Industrial rents increased by 9.0% in 2019 and 10.6% in 2020 despite the pandemic. Companies such as Samsung, Nike, and Adidas have transferred into Vietnam from China due to the latter’s steep production costs and the trade war with the US.
Meanwhile, the lack of investment options and high demand for apartments led to a housing market boom. From 2017 to 2020, apartment prices in Ho Chi Minh City surged by a whopping 90%, and in 2020 alone, it went up by 12.8% despite the Covid-19 crisis.
The country’s Ministry of Construction reported in July that the domestic property prices have continued to increase in the second quarter of the year due to the lack of new supply amid the pandemic. According to the ministry, housing prices went up between 2% to 7% in Hanoi and Ho Chi Minh City while some localities posted increases of 3%.
Source of charts: tradingeconomics.com