Vietnam’s ruling Communist Party will target annual economic growth of at least 10 percent over the next five years, despite a series of potentially “severe” challenges, including a newly imposed 20 percent U.S. tariff.
According to a report yesterday by Reuters, the target was contained in a document prepared by the ruling Communist Party of Vietnam (CPV) for its upcoming Party Congress, which was published on Wednesday. The five-yearly Congress will set the main policies for the country for the coming mandate, as well as deciding new leadership for key party positions and governments. The Congress is expected to take place early next year, but exact dates have yet to be confirmed.
The Vietnamese economy grew at an annual average of about 5.7 percent in the 2021-2024 period, according to Vietnamese government figures cited by Reuters. Hanoi expects growth to exceed 8 percent this year.
In its latest economic outlook for East Asia and the Pacific, the World Bank put the projected growth figure for this year slightly lower – 6.6 percent – than the government’s estimates. However, it still projected Vietnam to be the fastest-growing of the region’s developing economies in 2025 and 2026. It reported that Vietnam has benefited from a recent manufacturing rebound and consumer spending surge, backed by effective macroeconomic management, tamed inflation, and post-pandemic support for Vietnamese firms.
According to the document, which formalizes goals that Vietnamese officials have been discussing for the past few weeks, the CPV is also aiming to lift the country’s gross domestic product per capita to $8,500 by 2030. GDP per capita reached $4,700 last year, and is expected to rise to more than $5,000 by the end of this year, in line with the CPV’s target of $4,700-$5,000 for the 2021-2025 period.
The 10 percent annual growth target, which exceeds even the substantial economic growth rates that Vietnam has posted over the past two decades, is a strong sign of economic confidence by the CPV, despite the various economic headwinds facing the country.
As per the CPV document, these include the 20 percent U.S. tariff that came into effect in August, “faster than forecast” population aging, and the risks posed by climate change, natural disasters, and the corruption that the CPV has expended considerable energy on.
“Over the next five years, our country will face several difficulties and challenges, with some aspects expected to be harsher and more severe than the previous (five-year) period,” the document stated, according to Reuters.
The fact that the CPV is aiming not just to maintain but also to exceed the current growth rates is a sign of confidence in the fundamentals of the Vietnamese economy and its untapped potential in terms of infrastructure, high-tech manufacturing capacity, and domestic consumption.
To boost growth and offset possibly declining revenues from trade, the CPV plans a debt-funded investment in infrastructure and other projects, in part by raising its budget deficit to around 5 percent of GDP in the next five-year period, up from a range of 3.1-3.2 percent in 2021-2025.
Among the planned infrastructure projects are 5,000 kilometers of expressways, an $8 billion railway linking the port city of Hai Phong and the capital Hanoi with Lao Cai on the Chinese border, and metro systems in Hanoi and Ho Chi Minh City. Vietnam’s relatively low levels of public debt, which amounted to just under 35 percent of GDP last year, give it ample room to pour money into infrastructure upgrades.
Vietnam will also develop international financial centers in both Ho Chi Minh City and Danang, as well as “new-generation free trade zones” in major cities like Danang and Hai Phong to “enhance financial resources and attract investment,” Deputy Minister of Finance Nguyen Duc Chi told a National Assembly Standing Committee session on Wednesday.