Vietnam’s economy in 2025: Navigating growth amid global and domestic challenges

Vietnam heads into 2025 with strong growth prospects fuelled by foreign direct investment (FDI), export manufacturing, and infrastructure investments. Yet, geopolitical tensions and domestic hurdles may challenge this upward trajectory.

Dr Santiago Velasquez, Associate Program Manager, MBA at RMIT University Vietnam, provides a comprehensive analysis of Vietnam’s economic outlook, highlighting both the opportunities and risks the country faces as it navigates global dynamics and domestic reforms.

What will drive Vietnam’s economic growth in 2025?

FDI and export manufacturing are expected to underpin Vietnam’s economic growth in 2025. “In 2023, Vietnam’s FDI inflows were twice those of regional peers like Indonesia and the Philippines,” Dr Velasquez said, pointing to the country’s appeal as a destination for global giants such as Samsung, Apple, and Lego. Emerging players like Nvidia are also likely to follow, further solidifying Vietnam’s position.

The “China + 1” strategy continues to boost Vietnam’s attractiveness as a manufacturing hub. Its strategic location and competitive labour market, with wages at half the level of Chinese coastal regions, provide a significant advantage. Export manufacturing also benefits from strong global demand and the nation continues to have a heavy reliance on trade.

However, this trade dependency makes Vietnam vulnerable to external risks. Dr Velasquez said, “The prospect of a new trade war under the second Trump administration could result in higher tariffs on transhipment exports, potentially impacting GDP growth in 2025.”

Domestically, policy execution remains a challenge. Regulatory delays could stall critical infrastructure and renewable energy projects, which are vital for sustaining industrial expansion. Dr Velasquez emphasised that while Vietnam’s GDP will continue to grow, its trajectory will hinge on how effectively the country addresses these domestic bottlenecks and navigates external trade risks.

Can Vietnam achieve 6.5-7.0 per cent GDP growth in 2025? 

While the National Assembly’s target of 6.5-7.0 per cent GDP growth aligns with Vietnam’s strong fundamentals, Dr Velasquez expressed caution. “The fundamentals are strong, but geopolitical tensions and internal inefficiencies could temper these projections,” he said. Growth drivers include government infrastructure spending, a recovering real estate market, robust FDI, and the “China + 1” strategy. Government incentives like tax breaks and affordable land further support this outlook.

Domestically, regulatory delays could hinder key infrastructure and renewable energy projects, critical for sustaining industrial growth. The State Bank of Vietnam (SBV) also faces challenges in managing global interest rate differentials and persistent dollarisation (as in the preference of holding and transacting USD alongside VND), limiting its ability to adjust interest rates or stabilise the currency. These constraints complicate an already uncertain economic environment.

To build resilience, domestic consumption must grow. Businesses should adopt digital transformation and offer targeted discounts, while the government needs to reduce red tape, simplify regulations, and provide tax relief. “Infrastructure investment, particularly in transport and renewable energy, is tightly linked to both investor and consumer confidence,” Dr Velasquez said, noting its importance for long-term stability.

A roadmap for sustainable growth

To sustain growth, Vietnam must adopt a dual-engine model that balances export-driven strengths with a robust domestic market. “This approach will not only stabilise growth but also enhance economic inclusivity,” Dr Velasquez said. 

Both businesses and the government have pivotal roles. Businesses should embrace digital transformation, improve supply chains, and offer targeted discounts to boost demand and tap new markets.

The government should prioritise tax relief, such as reducing consumption and income taxes, to enhance purchasing power. Simplifying regulations and reducing red tape for large projects would improve business confidence. Infrastructure investments, particularly in transport and renewable energy, are crucial for short-term recovery and long-term stability.

“While GDP will indeed grow (and grow strong), the specific growth trajectory will depend on how well the country navigates external trade risks and adjusts domestic regulatory policies,” Dr Velasquez said. With proactive reforms, Vietnam can ensure sustainable prosperity.

Story: Quan Dinh H.

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