Việt Nam’s GDP growth to outpace region peers: Oxford Economics

An assembly line at a Taiwanese-invested company in Hải Phòng, specialising in plastic products and electronic components for the printing industry. — VNA/VNS Photo

Việt Nam will be the standout among the top six ASEAN economies (ASEAN-6), growing at a faster pace relative to its peers during the next few years, according to the Oxford Economics, a global economic advisory firm.

It forecast Việt Nam’s gross domestic product (GDP) growth will reach 6.7 per cent this year and 6.5 per cent next year, driven by a strong manufacturing sector and a rapid recovery in domestic demand. A key source of growth for Việt Nam next year will be its manufacturing exports.

Consumption growth should be broadly supported by stronger wage growth in 2025, mostly from the consequent feedthrough from FDI. In 2022, FDI sector workers earned around 14 per cent more than non-state sector workers.

Tourism will be another tailwind, too, though it will likely add less to growth than it did this year. Tourism receipts in 2023 were 6.6 per cent of nominal GDP.

Within Asia, Việt Nam has been the second-largest beneficiary of tourism this year behind Japan. Additional spillovers from tourism-related income will help to drive domestic spending.

While the boost from global chip demand will moderate next year, as strong base effects are working against chip production and demand is set to slow in the near-term, it should still be positive.

Earlier, stockpiling in the aftermath of supply chain disruptions has contributed to excess inventory, and demand is soft in the automotive, mobile and computer clusters.

Indeed, our proprietary Asia Chip Export Index shows that across Asia, growth in chip export volumes slowed from the start of the year, Oxford Economics said, noting in Việt Nam, this was reflected by contracting output in electronic component production in annual terms since mid-2024.

Other electronic related sub-components that make up electronic exports are also not overperforming.

Oxford Economics said 2025 should have sufficient tailwinds for manufacturing to remain solid. Artificial intelligence-related tailwinds, such as more spending on data centres globally, should present a structural boost.

Other large exporting sectors are machinery and electrical appliances, textiles and agriculture. A boost should come from the front-loading of export orders next year in anticipation of tariffs, which may be sufficient to offset soft electronics demand in the near term.

Greater US fiscal stimulus also presents an upside risk for 2025, given that the US is Việt Nam's largest export destination, it said.

According to Oxford Economics, growth in FDI inflows will continue to be maintained, although at a slower pace. It expects investment growth in 2025 to reach 7.2 per cent, higher than the 6.9 per cent forecast for this year.

Oxford Economics' projection is similar to that of other international financial institutions. The Asian Development Bank (ADB) previously raised its forecast for Việt Nam to 6.4 per cent this year and 6.6 per cent in 2025. HSBC also believed that Việt Nam's GDP growth could reach 7 per cent in 2024 and 6.5 per cent in 2025, the highest in ASEAN-6. Standard Chartered forecast that Việt Nam will grow strongly at 6.7 per cent in 2025. Meanwhile, UOB predicted that Việt Nam's growth rate in 2025 will be 6.6 per cent, the highest in ASEAN-6. — VNS