Growth amid Volatility: Vietnam Needs Long-term Strategy and Coordinated Policies

To achieve its growth targets amid persistent global economic volatility, Vietnam must prioritize areas such as climate-resilient infrastructure, efficient public investment, private sector development, and innovation in emerging technology sectors.

These remarks come from Mr. Nguyen Ba Hung, Chief Economist of the Asian Development Bank (ADB) in Vietnam.

Vietnam aims for 8.3-8.5% growth in 2025, significantly higher than ADB forecasts. Why is there such a discrepancy?

Firstly, the government’s growth target is aspirational and accompanied by supporting policy measures. From a planning perspective, this represents a very ambitious goal. From a forecasting standpoint, we rely on observable indicators, including global and regional economic conditions affecting Vietnam’s growth, as well as past performance and data from the early months of 2025. Achieving this ambitious target may face policy implementation lags, which largely depend on the government’s capacity to effectively execute policies and reduce these delays.

The government’s strategic direction and policy measures require comprehensive coordination across central and local authorities, from provincial to commune levels. Recent reforms of the two-tier government system and organizational restructuring aim to improve efficiency and reduce costs. In the short term, however, implementation faces challenges, a phenomenon economists refer to as “adjustment costs.” As a result, effective policy execution depends heavily on real-world conditions.

Vietnam has introduced key resolutions, including Resolution 68 to foster private sector development. How do you assess their impact on economic growth?

Developing the private sector involves more than Resolution 68; other resolutions, particularly Resolution 57 on science and technology, are equally important. For private enterprises to grow and compete internationally, investment in science and technology is essential. Currently, Vietnamese firms lag in this area. Without upgrading technological capacity to meet global standards, Vietnam risks losing growth opportunities. Resolution 68 cannot be viewed in isolation, as all these resolutions collectively aim to enhance enterprise competitiveness.

At a macroeconomic level, domestic economic growth is driven by consumption and investment. The public sector provides both public expenditure and public investment, but the government alone cannot sustain high growth; active participation from the private sector is essential to stimulate domestic demand and increase private investment.

In reality, the private sector’s competitiveness remains limited. Most private firms are small and medium-sized, constraining their ability to mobilize resources. Domestic enterprises contribute only about 25-30% of total export value, while foreign-invested enterprises account for more than 70%. This indicates significant room for private sector development.

Recent resolutions, including Resolution 68, are on the right track. Implementing these reforms effectively, however, requires a comprehensive approach. This includes not only direct support for private businesses but also improvements to the overall business environment, increased opportunities for technological investment, and stronger international competitiveness. Together, these measures enhance the private sector’s role as a driver of growth.

Infrastructure investment plays a particularly critical role in medium- and long-term growth. The sooner projects are completed and operational, the more they contribute to socio-economic development.

In addition to hard infrastructure such as transport, energy, and digital systems, soft infrastructure such as education and healthcare must receive priority. These sectors are essential for building a skilled workforce, which is a key driver of Vietnam’s future growth. Vietnam has significant opportunities to increase investment in these areas, and the returns on such investment are likely to be high.

The most important factor is creating a competitive business environment. When investment and business operations are efficient, sectors with high growth potential can develop strongly.

Vietnam has introduced major resolutions, including Resolution 68 to foster private sector development

ADB recommends harmonizing fiscal and monetary policies. If fiscal stimulus is insufficient, sustainable growth could face challenges. Could you elaborate on this and offer policy guidance?

Regarding monetary policy, the State Bank of Vietnam’s interest rates are currently relatively favorable, leaving limited room for further easing. The refinancing rate stands at 4.5%, while inflation is around 3.3%, implying a real interest rate of approximately 1% if inflation rises. This suggests that the current interest rate policy is appropriate.

The State Bank of Vietnam is also managing liquidity through open market operations, which has been effective relative to recent credit growth. Liquidity management aligns well with current market needs, supporting development demands.

On exchange rate policy, the central bank maintains a 5% fluctuation band around the central rate. Current market movements remain within this policy range. Vietnam’s balance of payments is relatively stable, with no need for intervention, indicating that the current exchange rate policy supports government objectives.

While the Vietnamese dong has depreciated against the U.S. dollar, the dollar itself has weakened against regional currencies, maintaining Vietnam’s export competitiveness. In the context of carbon tax pressures, this competitive pricing is positive. However, if global commodity prices rise significantly, import costs will increase, slightly affecting inflation but not to the extent requiring exchange rate intervention. Overall, current monetary and exchange rate policies are consistent with macroeconomic conditions.

Policy coordination is essential, with public investment and expenditure serving as drivers of private investment and domestic consumption. Domestic private enterprises can use credit growth policies to expand their business activities. This demonstrates effective coordination between fiscal and monetary policy. While the short-term impact may be limited, over the long term, increasing demand for investment credit will boost private sector growth and business expansion.

Thank you very much!

By Anh Mai, Vietnam Business Forum