Vietnam, frequently referred to as one of the “Asian Tigers,” has seen tremendous economic growth over the last forty years. Numerous conflicts, including the Sino-Vietnamese conflict and the Cambodian-Vietnamese War, made the Southeast Asian nation seem hopeless in the 1980s.
The government’s primary focus following the war was economic recovery, which resulted in revolutionary policies, the integration of international trade, and strategic placement in global supply chains.
Vietnam’s economy after the war
The government experienced a period of economic stagnation following the 1955–1975 Vietnam War. The years of centralised economic planning under communist rule were largely to blame for the economy’s underdevelopment, poverty, and reliance on agriculture. In addition to being cut off from other nations, Vietnam had little access to international markets.
Widespread poverty and underdevelopment were indicated by the low GDP of the nation. Due to the lack of foreign investment, the economy was largely reliant on subsistence farming, particularly rice farming. Vietnam’s centrally planned economy and post-war isolation also contributed to its lack of international trade and investment ties.
Considering that Vietnam was adopting the same development model as the Soviet Union and the Eastern European bloc, the country was on the verge of economic collapse by the early 1980s. The leaders’ adoption of new political and economic laws fuelled economic expansion.
Several factors, including Vietnam’s remarkable economic reforms and thriving tourism industry, have contributed to its economic growth.
Doi Moi reforms
Vietnam’s leaders successfully modernised and liberated their economic policies with the Doi Moi policy. It was difficult to build relationships with other nations in Vietnam prior to 1986 because it was an impoverished nation and the United States had placed severe sanctions on it.
In order to address this issue, the government put the new Doi Moi reform policies into effect, which included a shift from a centralised, state-run economy to one that is focused on the market. In order to attract foreign direct investment and stimulate economic activity in the private sector, the nation also eliminated all of its trade restrictions and adopted an export-oriented strategy.
Vietnam’s underdeveloped state was transformed into a more industrialised nation with many small businesses, foreign investment enterprises, skilled labour, and high exports by the ruling party’s implementation of economic reform over the next three decades. Individual investments and trades have increased as a result, since many Vietnamese people use Singaporean forex broker platforms and trading opportunities to grow their wealth.
The substantial amount of foreign direct investment is another factor contributing to Vietnam’s rapid economic growth. The US, Japan, and the European Union are among the countries that invest in Vietnam, particularly as Western investors look for alternatives to China. Vietnam gained appeal for several reasons after it opened its doors to other nations. Due to its advantageous East Asian location near international supply chains and its stable sociopolitical climate, there is a greater chance of attracting foreign interest.
Also, Vietnam is a party to a number of free trade agreements, including the Association of Southeast Asian Nations treaty framework and the EU-VN free trade agreement. The nation has put a lot of effort into building its infrastructure, particularly in the areas of digital and transportation infrastructure, which draws in investments from international businesses.
Key driving factors
Vietnam’s manufacturing and export industry has thrived since the Doi Moi policy due to favourable foreign interest, particularly in production industries like electronics, seafood, and textiles. Vietnam has positioned itself as a regional manufacturing hub by utilising its skilled labour and free-trade agreements.
Additionally, the county prioritises export-oriented manufacturing, such as clothing, electronics, and raw textiles. Due to rising labour costs in China, Vietnam has established itself as a substitute manufacturing location for businesses in need of dependable production bases. Vietnam’s export capabilities have been improved by investments in infrastructure, such as ports and transportation systems.
Vietnam has expanded its tourism industry in recent years and is now a popular destination for travellers from all over the world. With its cultural heritage, low prices, and strong social media influence, Vietnam has become a popular travel destination.
In the first quarter of 2024 alone, the Southeast Asian country welcomed over 40.6 million foreign visitors, a 72% increase from the year before. Additionally, Vietnam witnessed a quadrupling of domestic traveller trips over the last ten years. Nearly six million jobs are supported by this industry, which now makes up 7% of the national economy.
Vietnam now boasts a diversified economy, including a thriving export and manufacturing sector and a developing digital economy. It is now the second-largest coffee exporter in the world and a major manufacturer of textiles, footwear, and smartphones.
According to experts, the country’s GDP will grow at a rate of 6.1%, from the 5.8% growth predicted in April 2024, to approximately $468.5 billion by the end of 2024. The expansion of Vietnam’s middle class is stimulating the country’s retail, real estate, and services industries as well as domestic consumption.
A significant shift towards greener industries has also occurred, particularly with its renewable energy initiatives, which are a component of its long-term growth plan.
The bold transformation
Vietnam has become one of Southeast Asia’s most dynamic economies in a few decades, having gone from being an impoverished, invaded, and war-torn nation. The country has accelerated its growth thanks to its audacious economic reforms, FDI attraction, global trade integration, and a highly qualified labour force. Vietnam also prioritises high-value manufacturing, digital transformation, and sustainable development for its ongoing economic growth.
Meanwhile, the Macroeconomic Research Office stated that the country’s economy is projected to grow by 6.6% in 2025.
AMRO lead economist Sumio Ishikawa said, “However, the uneven economic recovery calls for a recalibration of macroeconomic policy mix to promote a more broad-based recovery, while safeguarding financial stability.”
In the short term, Vietnam’s prospects are improving because of the strong demand for export orders, even though Typhoon Yagi temporarily disrupted the economy.
The appreciation of the Vietnamese dong, tightening liquidity conditions, the recent drop in global oil prices, and weak domestic demand all contribute to the containment of inflationary pressure.
The central bank’s target ceiling of 4.5% is still below headline inflation, which is expected to increase from 3.3% in 2023 to 4.1% in 2024.
The rebound in exports contributed to the current account surplus, while resilient FDI inflows continued to bolster the financial account.