New fulcrums for economic growth

Increasing investment in research and development (R&D) allows Vietnam's economy to grow by 12-15 percent per year until 2045.

Innovation will be the foundation

GDP growth in the first quarter is estimated to increase by 5.66 percent compared to the same period in 2023, higher than the growth rate of the first quarter of 2020-2023. With the good start of the economy as all three important growth sectors (investment, export and consumption) are growing strongly that shows positive signs and bright prospects for the economy.

Commenting on the economic growth situation in the first quarter, Mr. Nguyen Quoc Viet, Deputy Director of the Vietnam Institute for Economic and Policy Research (VEPR), said that despite an improvement on last year's low growth, the Vietnam's economy in 2024 still has potential risks, creating stress on growth solutions until the end of the year.

Specifically, with the positive trend of the first quarter, if Vietnam continues to maintain macroeconomic stability, persist in policies to support businesses in recovering production and business (tax exemptions, reductions in loan interest rates) and policies to stimulate domestic consumption, the upward trend in domestic consumption and exports will spread in the next quarters.

However, in the complex and unpredictable developments in the global economy, slow growth recovery along with pressures from prices, inflation and the tendency to reduce consumer demand, domestic and international trade are still major obstacles and challenges in Vietnam's economic management and development.

Besides, due to geopolitical tensions, the pressure to maintain high interest rates, fluctuations in exchange rates, and even fluctuations in assets commonly used for investment such as gold also puts pressure on Vietnam's ability to maintain macroeconomic stability and its ability to expand export markets.

“In in 2024, although inflation is still under control, there will be price increases for certain items such as electricity, healthcare, education, and gasoline compared to 2023, which will create pressure on inflation in this year. This will narrow the policy space to support the recovery of domestic economic growth.

Therefore, we need to maintain appropriate interest rates for a long time, so that banks can provide capital to businesses for production. This depends on maintaining macroeconomic stability and exchange rate stability," Mr. Viet said.

However, according to experts, the main growth drivers of the economy are showing signs of slowing down and are under great pressure from outside. Meanwhile, the social labor productivity growth target was not met for the third consecutive year.

Therefore, in the time to come, in order to raise the GDP growth rate in 2024 to over 6 percent and strive to complete this target for the entire term at the highest level, in addition to strongly promoting the three growth drivers, (investment, consumption, export), need new fulcrums for growth. In particular, the application of science and technology and innovation are considered important factors and new growth drivers for Vietnam. Increasing investment in research and development (R&D) allows Vietnam's economy to grow by 12-15 percent/year until 2045.

Opportunity to change the growth model

According to a report by the National Innovation Center, innovation positively impacts the national economy, contributing up to 95 percent of the economy's competitiveness, 66 percent of innovation value will impact people's lives. It can be said that innovation through science and technology is the key to helping Vietnam overcome the "middle income trap" and soon escape from dependence on low technology and resources.

Therefore, Vietnam is increasingly perfecting the factors that promote innovation effectively. The reality of the development process of major economies in the world shows that transformations in science, technology and innovation will directly change the face of the economy. Therefore, innovation is one of the important indicators that guide the development center of each country.

Vietnam has a strong position and strength to take advantage of opportunities and develop the economy based on science, technology and innovation. Therefore, it is necessary to strongly promote resources and support the development of the business community, which is truly an important driving force in promoting socio-economic development, Deputy Director in charge of the Department of National Account System Nguyen Thi Mai Hanh said.

Carolyn Turk, Director of the World Bank in Vietnam, also said that Vietnam will need new drivers for economic growth to achieve its ambition of becoming a high-income economy by 2045 and innovation will be the basic foundation in raising income and improving growth quality.

Notably, according to Prof. Dr. Hoang Van Cuong, 2024 is also the year Vietnam has the opportunity to change its growth model. Accordingly, Vietnam must immediately seize new opportunities and growth drivers such as green transformation and digital transformation trends. This motivation not only stimulates domestic resources but also awaits foreign investment flows and green financial resources in this transition process.

“A once-in-a-generation opportunity to transform Vietnam's economy is the trend of shifting investment flows of high-tech industries. Typically, the US will shift limited high-tech investment industries to countries that are considered trustworthy. In particular, Vietnam is one of the countries receiving investment flows from the US in high-tech industries such as semiconductor chip manufacturing or artificial intelligence.

If we can capture this shift, it will create an opportunity for Vietnam to transform and change its growth model, from an economy dependent on investment activities in processing and low-value labor to a new growth model of industries based on science and technology, new products such as chips or artificial intelligence.

These are also industries that create very high added value, requiring us to use high-quality human resources, not labor-intensive like the textile, processing, and assembly industries. At the same time, it is also a condition for us to change the growth model, create outstandingly high labor productivity and is a turning point, a key factor to shift from an economy with low labor productivity to high labor productivity, from a middle-income country to make a breakthrough to become a high-income country, Prof. Dr. Hoang Van Cuong affirmed.