Viet Nam has rapidly grown into one of Southeast Asia's leading economies, fueled by substantial foreign investment, a youthful workforce, and rapid industrial development. Over the past decade, the nation has established itself as a crucial component of global supply networks, particularly in the electronics, textile, and machinery sectors.
Remarkably, just three decades ago, Viet Nam was among the world's poorest nations. How did this Southeast Asian country transform into a middle-income economy?
Viet Nam's Strong Economic Performance in 2024
In 2024, Viet Nam's economic growth reached 7.09 percent, exceeding the government's target of 6.5 percent, a significant rebound from the 5.05 percent decrease in 2023. Nguyen Thi Huong, head of the General Statistics Office (GSO), noted that this strong growth provides "important momentum for 2025."
The GSO reported that Viet Nam's exports in 2024 generated $405 billion, a 14 percent year-on-year increase driven by electronics, smartphones, and clothing.
This impressive growth occurred despite $3.5 billion in economic losses from natural disasters, notably Typhoon Yagi in September, which resulted in over 300 deaths. Additionally, more than 200 people died or went missing due to landslides, floods, and other weather-related events in 2024, with over 5.4 million livestock lost and 410,000 hectares of crops destroyed.
In the fourth quarter of 2024 alone, the year-on-year economic growth was 7.55 percent, which led Viet Nam to be the best-performing economy in Southeast Asia.
Viet Nam's Time of Poverty
Following the Viet Nam Wars (1955-1975), the country experienced economic stagnation. Its economy was primarily agricultural, underdeveloped, and struggling with widespread poverty, largely due to years of centralized economic planning under communist rule.
Viet Nam also faced international isolation with limited access to foreign markets. The low GDP reflected significant poverty and underdevelopment, with the economy heavily reliant on subsistence agriculture, particularly rice farming, which attracted little foreign investment. The centrally planned economic system and post-war isolation further restricted foreign investment and trade relations.
In the mid-1980s, Viet Nam's GDP per capita was stuck between $200 and $300. However, significant changes were implemented. In 1986, the government introduced "Đổi Mới," a series of economic and political reforms that shifted the nation towards a "socialist-oriented market economy."
The Rise of Viet Nam's Economy
Analysts from the World Bank and the think tank Brookings attribute Viet Nam's economic ascent to three key factors: a strong commitment to trade liberalization, the implementation of domestic reforms through deregulation and reduced business costs, and substantial public investments in human and physical capital.
Researcher Anja Baum, in her 2020 publication "Viet Nam Development Success Story and the Unfinished SDG Agenda," explained that "Đổi Mới opened up the centrally planned economy, starting with agricultural reforms, opening up free markets and international trade, and initiating pro-business reforms."
The government's reason for starting with agriculture was because 70% of the Vietnamese people worked in this sector and depended on rice for their livelihoods. Key measures included price subsidies for agricultural inputs, land allocation to farmers, and the development of irrigation systems.
Furthermore, researcher Kosal Path in his 2020 work "The Origins and Evolution of Viet Nam Đổi Mới Policy of 1986" mentioned that after establishing a strong agricultural base, the government liberalized trade, extensively welcomed foreign investors and domestic entrepreneurs, and ensured business certainty.
The country also removed various barriers and liberalized foreign tourism. Fiscal and macro-level strengthening was achieved through the devaluation of the Vietnamese Dong and the reduction of the budget deficit, alongside efforts to cut bureaucratic red tape, combat corruption, and enhance political stability.
Successful Economic Recovery
The reforms of Đổi Mới began to show results within a short period. Diplomat Hong Anh Tuan wrote in Globe Asia that by 1989, just three years after the reforms, Viet Nam had overcome its rice crisis and was exporting 1.4 million tons of rice, eventually becoming the world's largest rice exporter for many years.
Since then, Viet Nam has significantly reduced poverty, from an initial 70% to 32% in the 2000s. This led to the flourishing of private businesses, an influx of foreign investment, a surge in the state budget, and accelerated economic growth.
Viet Nam has evolved into a major manufacturing hub, attracting multinational corporations seeking alternatives to China due to increasing costs and trade tensions. The country is now a key production base for electronics giants like Samsung and Apple suppliers. Moreover, Viet Nam’s free trade agreements, including the CPTPP and RCEP, have strengthened its export competitiveness.
The government has prioritized infrastructure development, digital transformation, and renewable energy as crucial drivers of growth. Viet Nam is also making significant investments in semiconductors and electric vehicles to move up the value chain. However, challenges remain, including weak banking sector oversight, rising debt, and regulatory obstacles that deter some investors.
Future Outlook
PricewaterhouseCoopers once estimated in February 2017 that Viet Nam might become the fastest-growing economy in the world, with a potential annual GDP growth rate of around 5.2%, potentially making its economy the 20th largest globally by 2050.
Now, Viet Nam's economy is more diversified, featuring a robust manufacturing and export sector alongside a growing digital economy. It has become a leading producer of smartphones, footwear, and textiles, and the world's second-largest coffee exporter.
In the next years, Viet Nam's economy is projected to maintain strong growth, but risks such as global demand slowdowns, inflation, and reliance on external trade remain. If Viet Nam successfully navigates these challenges while fostering innovation and improving workforce skills, it could position the country as a leading industrial economy in Asia. Its ability to balance economic liberalization with state intervention will be crucial for its long-term success.
In just a few decades, Viet Nam has transformed from an agrarian, invaded, and war-torn nation, that has made the country become one of Southeast Asia’s most dynamic economies through bold economic reforms, the attraction of Foreign Direct Investment (FDI), integration into global trade, and a skilled workforce. For continued economic expansion, Viet Nam remains focused on digital transformation, high-value manufacturing, and sustainable development.
Read also: The Hue Imperial City: Viet Nam's Historic Pride and Symbol
References:
- P2K Stekom. Ekonomi Vietnam. p2k.stekom.ac.id/ensiklopedia/Ekonomi_Vietnam
- CNBC Indonesia. Dulu Negara Miskin & Hancur, Ini Rahasia Vietnam Bangkit-Kalahkan RI. cnbcindonesia.com/entrepreneur/20250107090303-25-601236/dulu-negara-miskin-hancur-ini-rahasia-vietnam-bangkit-kalahkan-ri
- World Economic Forum. The story of Viet Nam's economic miracle. weforum.org/stories/2018/09/how-vietnam-became-an-economic-miracle/
- Vietnam Briefing. Why Is Vietnam’s Economy Growing So Fast? vietnam-briefing.com/news/why-is-vietnams-economy-growing-so-fast.html/
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- The Jakarta Post. Vietnam economy expands by 7% in 2024, beating expectations. thejakartapost.com/business/2025/01/06/vietnam-economy-expands-by-7-in-2024-beating-expectations.html
- McKinsey & Company. Southeast Asia quarterly economic review: Steady amid uncertainty. mckinsey.com/featured-insights/future-of-asia/southeast-asia-quarterly-economic-review
