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| Seafood processed for export__Photo: VNA |
Vietnam has distinguished itself as one of the fastest-growing economies in the East Asia-Pacific region in 2024. The country's remarkable performance is attributed to a robust recovery in exports coupled with strong domestic demand, Andrea Coppola, the World Bank's Lead Country Economist and Program Leader for Equitable Growth, Finance and Institutions in Vietnam, Cambodia, and Laos, told the Vietnam News Agency.
How do you assess global economic growth in 2024? In your opinion, what are the key highlights and main drivers of global growth this year?
Andrea Coppola: The global economy is stabilizing, following several years of overlapping negative shocks, and it is estimated to grow by 2.7 percent in 2024. Despite elevated financing costs and heightened geopolitical tensions, global activity firmed in 2024 due to three main factors. The first factor is moderating inflation. Global headline inflation has continued to gradually ease, due to falling commodity prices (reflecting improving supply conditions both for energy and food commodities, despite geopolitical tensions) and the lagged effects of 2023 monetary tightening. Inflation is now close to inflation targets in many advanced economies and emerging markets and developing economies. Second, in a context of moderating inflation, monetary easing is supporting demand and economic activity in most advanced and developing economies. Third, as global demand is recovering, trade and investments are firming up and contributing to the steady expansion of the global economy. In this context, global growth in 2025 is expected to remain stable at the same levels experienced in 2024. Some deceleration in the two main engines of the global economy—the US and China—is expected to be offset by firming growth in other countries, including in many other emerging market and developing economies. The pickup in growth is anticipated to be broad-based, with growth set to strengthen in about 60 percent of economies.
Recently, several global financial institutions have downgraded their economic growth forecasts for Europe and warned that reciprocal tariff policies could weaken the economic outlook for Asia, particularly China and Southeast Asia, in 2024 and 2025. How do you evaluate this issue?
Andrea Coppola: Both economic growth in Europe and trade integration play an important role in driving growth for export-oriented economies in Southeast Asia. Weak growth in Europe and trade-restricting measures have a negative impact on exports and investments in Southeast Asian countries. While economic growth in Europe remains weak, the situation is gradually improving. Economic activity slowly accelerated from 0.4 percent in 2023 to 0.8 percent in 2024 and we expect it will further accelerate to somewhere between 1 percent and 1.5 percent in 2025.
In 2024, Vietnam's economy faced numerous challenges, including geopolitical tensions, rising interest rates in major economies, slowing growth among key trade partners, and the impacts of natural disasters. How would you assess Vietnam's economic performance this year in light of these challenges?
Andrea Coppola: Vietnam’s economic performance in 2024 has been very positive. Like many other countries in the world, Vietnam had to face the challenges associated with international geopolitical tensions and the vulnerability to climate change and natural disasters. Despite these adversities, Vietnam's economy demonstrated resilience, continuing its long-term trend of growth and development, and was able to achieve the fastest growth rates among all economies in East Asia, thanks to a rebound in exports and a gradual recovery of domestic demand. We expect that this positive performance will continue in 2025.
Reporter: Global FDI flows are shifting significantly towards new markets. Amid increasingly fierce regional competition, how do you assess Vietnam's competitive position compared to other countries in the region and globally? What factors help Vietnam maintain its competitive advantages, and what areas need improvement?
Andrea Coppola: Vietnam capacity to attract foreign investments remains strong. This is due to several important factors such as the stability that the country can offer to investors, the authorities’ attention to strengthen the business environment, and Vietnam’s strategic position as a “connector country” between two powers such as China and the US. To further strengthen its capacity to attract foreign investments, I think Vietnam could focus on upskilling its labor force, accelerate investments in transport and power infrastructure, including clean energy, which would help to reduce the carbon intensity of its exports, and deepen trade agreements to reduce remaining non-tariff policy barriers to trade and investments.
The World Bank projects Vietnam's GDP growth to reach 6.5 percent in 2025. In your opinion, what are the key risks that Vietnam needs to identify and overcome to achieve positive growth next year?
Andrea Coppola: The WB project that growth in 2025 will remain strong and Vietnam will be again among the fastest growing economies in East Asia. Three main risks could affect this positive outlook. First, the main uncertainty stems from slower-than-expected global growth, including from the US, European Union, and China, and a slower recovery of the real estate sector. Second, if banking sector asset quality were to weaken further, bank lending capacity could be undermined which could negatively affect investment growth. Third, Vietnam also remains vulnerable to the intensifying climate-related natural disasters. Should downside risks to growth materialize and give limited room for monetary support (given expected appreciated of the US dollar at the global level), accelerating disbursement of public investment could support aggregate demand. To mitigate financial sector risks and vulnerabilities, the authorities could encourage banks to improve capital adequacy ratios and strengthen the institutional framework for prudential supervision and early interventions.
Structural reforms will be critical to longer-term growth – including in education sector and business environment to enhance productivity and competitiveness of the domestic economy, and promote vertical upgrading into high-value activities for trade.
How do you assess the effectiveness of the economic policies implemented in 2024? What are your policy recommendations for Vietnam to overcome these challenges and achieve its economic growth targets for 2025?
Andrea Coppola: In 2024, authorities successfully leveraged monetary and fiscal policy instruments to maintain macro-economic stability while supporting the gradual recovery of domestic demand. We should also commend the authorities’ continuous efforts to strengthen the business environment by simplifying regulations which is key to promote the development of the Vietnamese private sector. Going forward, to sustain economic growth in a sustainable and inclusive manner, I think it is important for authorities to focus the reform agenda on people, infrastructure and institutions. Accelerating investment in human capital by upskilling the Vietnamese labor force and in transport and power infrastructure is critical to further improve the productivity and competitiveness of Vietnamese private sector. Modernizing Vietnamese institutions by making them more efficient and effective will help Vietnam to continue its development journey towards becoming a high-income country by 2045.
On this occasion, I would like to take this opportunity to wish everyone a wonderful 2025 full of health, prosperity, and happiness.- (VNA/VLLF)
