Vietnam Economic Update Report, Q4 2024

GDP growth beats forecasts to reach 7.1% in 2024

Vietnam’s economy records an increase of 7.6% YoY in the last quarter of 2024 and maintained the upward trend throughout all previous three quarters of 2024 and successfully surpassing its target of growth for the whole year 2024 of 7.1% comparing to 6.5% of the target.

According to the Vietnam’s General Statistical Office, Vietnam’s economy records an increase of 7.6% YoY in the last quarter of 2024 and maintained the upward trend from the previous quarters (it grew by 5.98%in the first quarter, 7.25% in the second, and 7.43% in the third).

This growth has closed a successful year for Vietnam with the entire year’s GDP Growth achieving 7.1% growth, exceeding the 6.5% target set by the National Assembly.

Of the total increase in the added value of the economy in 2024, the agricultural, forestry, and fishery contributed modestly at 5.4%, while the two key drivers are still the industrial and construction sector and the service sector with 45.2% and 49.5% respectively.

The agricultural, forestry, and fishery sectors achieved a growth rate of 3.3 percent despite being affected by natural disasters, especially Typhoon Yagi in September 2024. Read more about the impact of Typhoon Yagi on Northern Vietnam here.

Within the industry and manufacturing, many key sub-sectors record impressive growth led by rubber and plastic products, furniture products and automotive production, leather-made goods, coke, and refined petroleum products and textiles. This growth is thanks to strong and timely government support with incentive policies to fuel the growth of many key industries, especially a 50% reduction in registration fees to support the domestic automotive assembly industry. Secondly, the Government and Prime Minister’s investment promotion, advertising, and search for new export markets throughout 2024 have been continuously implemented. In addition, Vietnam has taken advantage of international advantages such as the increase in textile and garment orders due to the conflict in Bangladesh, pioneering in the production of battery-powered cars, etc. have created opportunities for businesses to expand production, increasing export turnover.  Thirdly, focused investments in streamlining the administration process, for example, shortening average time for business registration by 30%, as well as recent enormous investments in local infrastructure developments to foster manufacturing in local provinces.

Trade and tourism activities maintained high growth momentum, contributing positively to the growth of the service sector, driven by wholesale and retail increased by 7.9%; transportation and warehousing increased by 10.8%; finance, banking, and insurance activities increased by 7.1%; accommodation and food services increased by 9.8%.

The Consumer Price Index (CPI) in 2024 rose by 3.6%, aligning with the National Assembly’s target. December’s CPI increased by 0.3% from the previous month, driven by higher prices for healthcare services, rental housing, and fuel.

Total foreign investment capital registered in Vietnam as of December 31, 2024, reached 38.2 billion USD, down 3.0% over the same period last year. A total of 3,375 new projects with the manufacturing and processing industry taking the lead with 25.6 billion USD, followed by real estate with 6.3 billion USD. In terms of investors, 114 countries and territories poured capital into the country. Singapore topped the list with 10.2 billion USD, followed by the Republic of Korea, China, Hong Kong, and Japan. The implementation of major projects in semiconductors (NVIDIA, Hana Micron, Amkor Technology, Foxconn’s Subsidiary, Shunsin, etc.), energy, and high-tech industries has bolstered the local economic transformation.

US tariff threats and opportunities for Vietnam

As former U.S. President Donald Trump returns to power, officially announced on November 6th, Vietnam, a burgeoning center for manufacturing and a vital U.S. trading partner, could stand to benefit considerably from heightened U.S. – China tensions. Trump’s plans to impose additional tariffs on Chinese imports during his election campaign have cast a big concern over the new trade tensions.

The imposition of U.S. tariffs on Chinese goods has prompted numerous multinational corporations to shift their manufacturing bases to Vietnam. This migration is also driven by Vietnam’s competitive labor costs, strategic geographic location, and favorable trade agreements with various big markets. As a result, Vietnam’s exports to the U.S. have experienced a substantial increase, with the trade surplus reaching a record $104.6 billion in 2024 with 20.1% of CAGR since 2018.

Besides, the realignment of global supply chains has led to a significant influx of FDI into Vietnam. During the previous Trump administration, major foreign corporations, including Apple, Foxconn and Intel started pivoting to Vietnam as a way to diversify their manufacturing portfolio. Just two months ago, SpaceX announced a $1.5 billion investment in Vietnam, too. Even the Trump Organization is investing in the country, with a recently trumpeted $1.5 billion luxury real estate deal. The shift in manufacturing could also help Vietnam enhance its position in electronics, information technology, and component manufacturing.

Potential risks for the economy

However, the expanding trade surplus cast doubts on Vietnam’s becoming the next target of Trump’s policy after Mexico and Canada. Unlike the previous term, in this term, besides China, the US also set the two neighbor countries, Mexico and Canada, as its other targets, which both also cause a big trade deficit for the US.

Accordingly, the picture for Vietnam is quite similar to some extent when the country has received a trade deficit of $104.6 billion by 2024, only after China and Mexico. The evolution of trade flows between China, Vietnam, and the US also confirms that the dip in China exports to the USA in 2015-2020 corresponds to a rise in both Chinese exports to Vietnam and Vietnamese exports to the US.

Vietnam’s government actions

While there is not yet any action from the White House about any trading remedies for Vietnam, the Vietnamese government keeps their head up for any possibilities for a trade tension happening this year with suitable policies.

Firstly, Vietnam is in the effort to narrow down the trade surplus with the US through its push for importing more goods from the US, starting with US agricultural products.  Also, Vietnamese officials have discussed with the Trump administration the possible purchase of U.S. liquefied natural gas, multiple officials said.

Secondly, Vietnam is focusing more on developing other factors to strengthen its competitive advantages instead of relying on tariff benefits. Accordingly, Vietnam has a number of advantages over other regional rivals like India to become an attractive destination for tech companies seeking new locations to avoid trade barriers. First, as a single-party authoritarian state, Vietnam can and does set new business-friendly policies quickly. Additionally, the country is geographically well-positioned: it already has three of the world’s top 50 busiest ports and is next door to China, making trade and logistics between the two countries easier. Critically, Vietnam also has a free-trade agreement with other countries and regions, including the European Union – the only other regional country besides Singapore to have one or the country’s relationship upgraded with 3 countries, including Australia, France, and Malaysia, to a Comprehensive Strategic Partnership this year.

With the current policy, as long as a product reaches the rate of 30% localization within Vietnam, it can legally be exported as “made in Vietnam”, with duties of 15% maximum (often less, depending on its category). Vietnam’s Ministry of Industry and Trade (MoIT) is actively working to establish stricter criteria for Vietnamese-origin products. These guidelines may focus on goods genuinely produced in Vietnam from raw materials or those transformed through substantial processing that genuinely alters their nature. Products that undergo only minimal processing might no longer qualify as Made in Vietnam, which is a significant shift. Many China-derived goods only undergoing last-mile assembly or packaging in Vietnam might soon not be enough.

Implications for doing business in Vietnam

Amid escalating global trade tensions, Southeast Asia – particularly Vietnam – emerges as a key alternative for companies diversifying beyond China. However, as trade dynamics grow more complex, Vietnam’s government is proactively implementing measures to safeguard its competitive edge, including narrowing the trade balance gap with the U.S. and tightening localization requirements for “Made in Vietnam” certification.

While these policies reinforce Vietnam’s commitment to maintaining investor confidence amid the rising “China+1” strategy, they also signal potential regulatory shifts aimed at protecting national interests. Consequently, businesses must adopt a more nuanced approach, considering both regional and local market dynamics to fully leverage Vietnam’s advantages. To mitigate risks and enhance supply chain resilience, companies need greater agility in their sourcing strategies, ensuring they remain adaptable in an increasingly uncertain global landscape.