The Vietnamese economy has been ASEAN’s outperformer this year, with full-year growth likely to stand at 6.7%, and will continue to outperform its ASEAN-6 peers, growing by 6.5% next year, said Oxford Economics in its latest report.
ASEAN – 6 comprises Malaysia, Singapore, Indonesia, Thailand, Vietnam, and the Philippines.
The advisory firm points out that Vietnam’s economic growth next year will continue to be driven by the export of processed and manufactured goods. The county is currently a key packaging and testing (APT) hub for the semiconductor industry, with notable factories from Intel and Amkor Technology.
Although global demand for chips is expected to slow down next year, the semiconductor industry will still contribute positively. The oversupply of inventory following supply chain disruptions has weakened demand in sectors like automotive, mobile phones, and computers. Export growth in chips in Asia has slowed since early 2024.
In Vietnam, the decline in electronic component production since mid-2024, along with a downturn in the production of electronic accessories, shows clear effects. However, the manufacturing sector is expected to gain new momentum by 2025, fueled by fields related to artificial intelligence, especially increased investment in global data centers. While Vietnam is not yet producing chips, its role as an APT hub will continue to benefit the country.
Besides semiconductors, other major export items such as machinery, electrical equipment, textiles, and agricultural products are expected to maintain growth. Another driving factor is the increase in exports as firms try to avoid potential tariff hikes, helping to offset the short-term weakness in electronics demand. In addition, the US’ loose fiscal policy will benefit Vietnam, as the US remains a leading export market.
Oxford Economics experts state that foreign direct investment (FDI) inflows into Vietnam will continue to grow, although at a slower pace. Currently, FDI enterprises account for 75% of the country’s total export turnover, and this inflow of FDI is expected to continue driving exports due to concerns about high taxes on goods produced in China.
According to the firm, FDI inflows into Vietnam may slow down in early 2025 due to uncertainties surrounding whether the US will impose tariffs on goods from Vietnam. If tariffs are applied, a 10% tax would be imposed on items such as automobiles, metals, and solar panels.
However, the effects of US tariff rates are not set to significantly impact Vietnam in 2025 due to the delay between the announcement of the tariff and its implementation.
The domestic sector outlook remains bright, while solid wage growth, driven by FDI job creation, should support private consumption.
Economists predict that credit growth should be better in 2025. Recent changes to credit controls and a better domestic business sector should provide some support to credit growth.
However, they also judge that the drag from real estate will likely last until the end of 2025, whilst offloading bad debt will take some time.