Speaking at a Recent Event, Prof. Dr. Pham Hong Chuong, President of National Economics University (NEU), Said That 2024 Could Be Considered an Eventful Year With Many Significant Transformations. The Real Economy Showed Many Signs of Recovery, With Full-Year GDP Growth of 7.09%, Exceeding the Government’s Target of 6–6.5% and Significantly Outpacing Other Countries in the Region.

Over the past year, Vietnam also continued to integrate more deeply into the global economy, with total merchandise exports and imports estimated at USD 786.29 billion, equivalent to approximately 165% of GDP. The foreign direct investment (FDI) sector continued to overshadow the domestic sector, accounting for 71.7% of total exports and 63.2% of total imports. The FDI sector’s value-added contribution to the economy remained disproportionately low.

Meanwhile, many domestic businesses continued to face difficulties and were unable to establish linkages with the FDI sector that would enable them to participate more extensively in global production networks.

For these reasons, Prof. Dr. Pham Hong Chuong described the target of achieving 8% GDP growth in 2025 and moving toward higher growth in subsequent years as challenging in the current context.

According to Mr. Chuong, maintaining sustainable growth over the long term requires not only harnessing traditional growth drivers but also, crucially, establishing an appropriate system of economic and political institutions.

Mr. Chuong said that an inclusive institutional system provides an important foundation for a fully functioning market economy and encourages the vast majority of people to participate in economic activities.

Mr. Chuong also cited research from the publication “Vietnam Annual Economic Review 2024,” in which experts observed that reforms to Vietnam’s institutions and business environment were proceeding with unprecedented urgency. In particular, the publication also identified achieving the 8% growth target in 2025 as an immense challenge, given numerous domestic and international influences.

The publication therefore offered several recommendations, including opening up the capital market while ensuring financial security, expanding investment opportunities for domestic private businesses, and continuing to implement a proactive, flexible monetary policy closely coordinated with fiscal policy to control inflation. It also called for removing institutional bottlenecks to accelerate the disbursement of public investment funds.

Discussing the 8% GDP growth target for 2025, Assoc. Prof. Dr. Pham The Anh of NEU said that the focus must be on stimulating domestic growth drivers, with long-term investment resources coming from the private sector.

The expert said that new U.S. tariff policies would affect Vietnam’s goods exports to that market. In addition, the free trade “playing field” is changing, with countries introducing new tariff policies and major economies adopting unpredictable trade policies. This indicates that Vietnam faces numerous risks because its economy is heavily export-oriented.

Assoc. Prof. Dr. Pham The Anh also said that exports, investment, and consumption—the three aggregate-demand drivers of growth in 2025 and subsequent years—would be affected.

Regarding exports, the expert explained that once new tariff policies take effect—even if that happens in 90 days, following negotiations—the world will still face higher tariffs. Vietnam’s export-driven growth will therefore certainly be affected. This will also have some impact on FDI flows.

In addition, consumption, a near-term driver of domestic growth, is also being affected. Inadequacies in personal income tax, slow income growth, rising living costs, and high housing market prices, among other factors, are currently constraining consumption. This bottleneck therefore needs to be removed to stimulate growth through domestic consumption.

Regarding private investment, attracting it requires an investment environment based not on a one- to two-year horizon but on macroeconomic fundamentals, accompanied by stable, consistent policies over the long term. However, domestic businesses currently continue to face many difficulties. A better business environment, supported by institutions that remain stable over many years, is therefore needed.

As for public investment, the expert said that removing legal risks and unblocking public investment projects would provide momentum for economic growth. However, public investment would only partially offset negative external impacts.

In his view, public investment cannot serve as a long-term growth driver. Long-term investment resources must come from the private sector rather than public investment, because the latter is very small relative to the economy, and budgetary resources are insufficient to fund these projects at high levels. This means that improving the business environment, making legal procedures transparent, and removing administrative barriers are necessary to unlock private capital flows and translate them into real growth.

“Achieving double-digit GDP growth or growth above 8% is very challenging and risky, because ‘forcing disbursement’ is unlikely to be effective in attracting private investment,” said Assoc. Prof. Dr. Pham The Anh.

Linh Dan

Link: https://vietnamfinance.vn/pgsts-pham-the-anh-nguon-luc-dau-tu-dai-han-phai-den-tu-tu-nhan-d125049.html

This is an automated translation. If you notice any errors, please contact the Department of Communications, National Economics University at phongtruyenthong@neu.edu.vn.