Vietnam's gross domestic product (GDP) in the first quarter of 2024 reaches the highest record of the same period during the period of 2020-2023

Vietnam's economy experienced a robust 5.66% growth in the first quarter of 2024, exceeding the growth rates for the same period from 2020 to 2023.

The industry and construction sectors were the key drivers for the economy, with a 6.28% increase in growth rate, accounting for 41.68% of the total national growth. The impressive growth of these sectors was directly fueled by the government’s policy of encouraging public investment.

Focus on promoting tourism and trade resulted in a 6.12% expansion of the service sector in the first quarter. Due to this growth, the service sector now comprises over 52.2% of Vietnam’s GDP growth. The agriculture, forestry, and fishery sectors are showing signs of recovery, though at a more moderate pace with a growth rate of 2.98%.

Graph showing Vietnam GDP Growth Rates per Quarter (Q1 2020 to Q1 2024)

Manufacturing played a crucial role in driving Vietnam’s economic expansion. The processing and manufacturing industry saw a surge of 6.98%, contributing 1.73 percentage points to overall growth. Additionally, electricity production and distribution experienced a remarkable growth of 11.97%, adding 0.45 percentage points. Water supply, waste, and wastewater management and treatment grew by 4.99%, making a smaller yet significant contribution of 0.03 percentage points.

Manufacturing has been central to Vietnam’s export economy since the The Doi Moi economic reforms were a series of significant changes initiated in 1986 by the Communist Party of Vietnam, marking a shift away from a Soviet-style, centrally planned economy and towards a “socialist-oriented market economy. Its strategic Southeast Asian location, stable politics, and affordable labor force have transformed the country into an emerging manufacturing hub. Vietnam’s manufacturing sector is reaping the benefits of a global manufacturing relocation wave from China. With its numerous advantages, Vietnam is emerging as a top choice for foreign businesses seeking new manufacturing hubs.

Vietnam’s strong economic ties with developed nations like South Korea and the United States, coupled with its supportive government policies and attractive incentives, have proven instrumental in luring major corporations like Samsung, Apple, Intel, and Nvidia to expand or establish new manufacturing plants in the country. This influx of foreign investment is fueling the growth of Vietnam’s manufacturing industry and is expected to continue driving its expansion in the coming years.

Within the service sector, trade activities were buoyant, and tourism rebounded strongly. This resurgence can be attributed to favorable visa policies and effective tourism stimulus initiatives. Noteworthy service subsectors driving the growth include:

  • Transportation and warehousing: 10.58% increase, adding 0.68 percentage points to growth.
  • Accommodation and catering services: 8.34% increase, adding 0.24 percentage points.
  • Wholesale and retail trade: 6.94% increase, adding 0.76 percentage points.
  • Financial, banking, and insurance activities: 5.2% increase, adding 0.32 percentage points.
  • Information and communication sector: 4.14% increase, adding 0.28 percentage points.

While the growth rate of 5.66% for Q1 2024 outpaces the 3.41% expansion in the same period of 2023, it is slightly below Bloomberg’s forecast of 6.3% and marks a decrease from the previous quarter’s growth of 6.72%. This slowdown can be partly attributed to a dip in smartphone and automobile production.

Chart showing Vietnam GDP structure in the first quarter of 2024

Investment remains a vital factor in Vietnam’s growth trajectory. Realized social investment capital at its current price reached USD 613.9 trillion VND, a year-on-year increase of 5.2%. Foreign direct investment (FDI) also contributed positively, as capital realized in Vietnam in the first 3 months of 2024 for FDI projects totaled $4.63 billion, representing a 7.1% year-on-year increase.

Inflationary pressures continue, as CPI increased by 3.77% over the same period last year and core inflation rose by 2.81%. However, Dr. Can Van Luc, Chief Economist of BIDV bank and a member of the National Financial and Monetary Policy Advisory Council, remains optimistic that Vietnam can achieve its target GDP growth of 6-6.5% this year.

Addressing concerns surrounding potential power shortages, Prime Minister Pham Minh Chinh assured foreign investors that the prior year’s challenges would not repeat, citing efforts to ramp up coal imports. According to the General Statistics Office of Vietnam (GSO), Vietnam’s electricity output in the first quarter increased by 11.4% from 2023 to 65.5 billion kWh.

Four new laws addressing land use, real estate, housing, and credit institutions are anticipated to positively influence the market starting in 2025. Early response to these legislative changes has been favorable.

With public debt, budget deficits, and financial obligations remaining within targets set by the National Assembly, the government retains fiscal flexibility to potentially introduce further economic stimulus measures.

Vietnam Posts $8.08 Billion Trade Surplus in Q1 2024, Growth Continues

Vietnam experienced a remarkable surge in export growth during the first quarter of 2024, overcoming considerable challenges of the rising shipping cost.

Vietnam experienced a remarkable surge in export growth during the first quarter of 2024, overcoming considerable challenges posed by rising shipping costs. Shipping disruptions in the Red Sea inflated the cost of shipping cargo from Vietnam by a notable 55% to 73%. Despite these obstacles, Vietnam’s trade activity flourished, fueled by increased demand in major export markets and a continued economic recovery post-COVID-19.

Many of Vietnam’s major export markets have rebounded from recession, signaling a positive outlook for the country’s import and export activities. Vietnam’s key market, the United States, saw strong growth with an estimated turnover of 26.06 billion USD, accounting for 28% of total exports and a 25.5% increase compared to last year’s decline.

China follows, estimated at 12.68 billion USD with a 5.2% increase (compared to last year’s decline). The EU market is estimated at 12.1 billion USD, a 16.3% increase (also in contrast to last year’s decline). Korea is estimated at 6.6 billion USD (12.9% increase), and Japan at 5.7 billion USD (6.4% increase), both showing improvement after previous declines.

In Q1 2024, the combined value of imports and exports reached a substantial $178.04 billion, marking a 15.5% increase compared to the same period in the previous year. This expansion was led by a 17% year-on-year jump in goods exports, totaling $93.06 billion. Imports also saw strong growth, rising 13.9% to $84.94 billion. As a result, Vietnam achieved a significant trade surplus of $8.08 billion, exceeding the $4.93 billion surplus recorded in the same quarter of 2023.

Vietnamese cargo port

Both the domestic and foreign-invested sectors played a critical role in Vietnam’s trade performance. The domestic economic sector generated $25.21 billion in exports, representing a 26.2% increase and accounting for 27.1% of Vietnam’s total export turnover. Meanwhile, the foreign-directed investment (FDI) sector, which includes crude oil, was responsible for $67.85 billion in exports, reflecting a 13.9% increase and a 72.9% share of overall export activity.

Service trade also witnessed considerable growth during the quarter. Service exports were estimated at $5.67 billion, a 24.7% year-on-year increase, while service imports reached $8 billion, rising 26.8%. This resulted in a service trade deficit of $2.33 billion.

The United States maintained its position as Vietnam’s leading export market with a turnover of $26.2 billion. China continued to be the largest import market for Vietnam with a turnover of $29.4 billion.

FDI disbursement in the first 4 months hit a 5-year record and flows strongly into manufacturing and real estate

Apartments in Ho Chi Minh City

Foreign direct investment (FDI) disbursement in the first four months of 2024 reaching $6.28 billion, 7.4% increase from the previous year, Vietnam broke the highest four-month amount record in the past five years.

The processing and manufacturing sector was the dominant force behind this FDI surge, attracting a substantial $4.93 billion or 78.5% of total disbursements. This solidifies Vietnam’s status as a Southeast Asian manufacturing powerhouse, driven by its skilled workforce, developing infrastructure, and pro-business policies.

Real estate followed as the second-largest beneficiary, receiving $607.6 million in FDI. This signals sustained growth in Vietnam’s industrial real estate market, spurred by foreign investment flows. As global companies seek to establish production centers, Vietnam’s logistics sector is expanding with a focus on ready-built factories and warehouses.

FDI is also providing a boost to Vietnam’s infrastructure development. Investments are improving transportation networks and services within industrial parks, and many new industrial park projects have been approved.

To uphold its regional competitiveness, Vietnam must prioritize ongoing advancements in infrastructure, workforce skillsets, and investment incentives.

These impressive FDI figures paint an optimistic picture of Vietnam’s economic growth. This trend demonstrates Vietnam’s commitment to fostering a pro-business environment and its strategic focus on manufacturing and infrastructure development. With its youthful workforce, Vietnam is poised to further solidify its role as a leading Southeast Asian center for both manufacturing and investment.

Surging Global Interest: Investing in Electronics and Semiconductors in Vietnam

Vietnam's potential in the global supply chain is attracting significant interest from foreign corporations, particularly in the electronics, semiconductor manufacturing, and renewable energy sectors.

This trend is evident in the 73% year-on-year surge in foreign direct investment (FDI) registration, reaching $7.1 billion in the first four months of 2024.

Semiconductor production line

A key driver of this interest is the Vietnamese government’s proactive approach to attracting foreign investment in the semiconductor industry. Vietnam is actively refining its legal system, mechanisms, and policies to improve the investment environment, creating attractive incentives for technology companies and conglomerates specializing in semiconductors and electronic chips. This strategy is proving successful, as a growing number of major corporations are expressing interest in Vietnam’s semiconductor sector.

Major corporations like Intel, Samsung, Synopsys, Qualcomm, Infineon, and Amkor already have a presence in Vietnam and are planning to further expand their investments. This ongoing commitment highlights Vietnam’s growing importance in the global semiconductor supply chain.

The recent commitment from the US President to support Vietnam’s participation in the global high-tech value chain, particularly the chip and semiconductor industry, has opened significant opportunities for Vietnam. This has spurred interest from large US semiconductor companies like Nvidia, Apple, Marvell, and GlobalFoundries, which are actively considering establishing chip factories in Vietnam.

Vietnam boasts great potential for developing its semiconductor industry, possessing a young, innovative workforce with relevant training. Companies are increasingly recognizing the value of Vietnam’s skilled labor pool, moving away from solely focusing on cheap labor costs.

The Vietnamese government’s commitment to developing the domestic semiconductor industry, along with its supportive policies and incentives, is a major advantage for corporations looking to invest in Vietnam.

The increasing demand from corporations to invest in Vietnam’s semiconductor industry presents a promising opportunity for Vietnam’s economic growth and its role in the global technology sector. With continued government support and a skilled workforce, Vietnam is well-positioned to become a major player in the global semiconductor supply chain.

About this report

This report was compiled with contributions from the team of business experts in our Vietnam office.

ARC Consulting, a division of ARC Group, is an advisory firm specialised in supporting western companies operating in Asia. We are on a mission is to bridge between the business ecosystems of Asia and those in Europe and the US. Our services cover market entry and expansion, ESG, production and sourcing, cross-border M&A as well as operational improvement and compliance.

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