Doing business in Vietnam: economic snapshot April 2018 | finder.com

ECONOMIC SNAPSHOT
VIETNAM

Internal perspective

Despite slower demand from trading partners, Vietnam is seeing a growth in manufacturing exports and the digital economy. Its citizens have more disposable income — reflected in increased spending on phones, travel and health products. Experts forecast that Vietnam’s GDP will only rise further.

Population

94,569,072 (2016)

Internet users

52.7% (2015)

Gross domestic product (GDP)

  • $205.276 billion

Top 5 Imports

Top 5 exports

Languages

Top 3 Trading Partners

Top franchises

GDP growth rate (est.)

  • 6.211% in 2016
  • 6.27% in 2017

Trends and outlooks

  • Sharp economic growth
  • Decline of state-owned businesses
  • Commitment to exports as part of the TTP

Economic challenges

  • Rapidly growing labor force
  • Under-capitalized banking sector
  • Restructuring public investment and state-owned enterprises is lagging
  • Drought, corruption and rural poverty still issues

Introduction

According to 2017 International Monetary Fund data, Vietnam is the world’s 46th-largest economy based on nominal gross domestic product (GDP), which evaluates market prices, and the 34th-largest economy based on purchasing power parity (PPP), which compares the prices of like consumer goods among countries.

Vietnam has experienced rapid economic growth since the mid-1980s, when it began moving from a command to a mixed economy model, combining a planned economy with a free market. With a population of some 95 million, Vietnam ranks 132nd in the world based on nominal GDP per capita and 125th based on GDP by PPP per capita. These measures divide nominal GDP and GDP by PPP by the country’s population.

What should I know about nominal GDP and PPP?

Among the multiple ways that economists measure a country’s economic strength, nominal GDP and PPP are two of the most common.

Nominal GDP is based on official government estimates and depends on exchange rates between two countries, typically using the US dollar for one of the denominations. It’s useful for measuring financial flows between countries. But because it doesn’t consider differences in cost of living, it can distort per capita income estimates.

PPP, on the other hand, considers the relative cost of local goods, services and inflation rates — all factors considered to reflect a country’s domestic market. Because PPP compares the costs of a common “basket of goods” — some 3,000 consumer goods that include food, fuel and insurance — it’s considered a more ideal way to project per capita income projections and gauge poverty thresholds.

Economic indicators

Vietnam’s official currency is the Vietnamese dong (VND). The dong has recently fluctuated between 22,000 and 25,000 VND against the US dollar.

Much of Vietnam’s business sector comprises small and medium enterprises. The country is a major agricultural exporter and an attractive destination for foreign investments.

The services sector accounted for 44% of the country’s GDP in 2016. Luxury hotels and resorts are springing up, a testament to the country’s booming tourism industry, which welcomed more than 10 million foreign visitors in 2016.

Industry accounted for 39% of GDP in 2016. In the past, Vietnam relied on crude oil exports to prop up its economy, but it’s recently focused on manufacturing that includes food processing, cigarettes and tobacco, textiles, chemicals and electrical goods. The country is fast becoming an alternative to China in attracting foreign manufacturers with low labor costs.

Agriculture accounted for just 17% of GDP in 2016. Vietnam is the world’s second-largest coffee exporter and among the largest exporters of rice.

The country comprises around 55 million Vietnamese workers. As of October 2017, unemployment is pegged at 3.7%.

Major contributors to the economy

Vietnam is a member of the World Trade Organization, Asia-Pacific Economic Cooperation and the Association of Southeast Asian Nations (ASEAN). China, the US, the EU, Southeast Asia, Japan and South Korea are among its top trading partners, and it holds trade agreements with several others.

The country’s top exports include:

  • Electrical machinery and equipment
  • Organic chemicals
  • Plastics and plastic articles
  • Computers and machinery
  • Books and other periodicals

Its major imports include:

  • Electrical machinery and equipment
  • Machinery, including computers
  • Plastics and plastic articles
  • Iron and steel
  • Mineral fuels, including oil

Economic prospects

Rapid economic growth from the mid-1980s has significantly reduced poverty levels in Vietnam.
The country’s GDP growth averaged 6.4% annually in the 2000s, and experts forecast the economy will continue growing in the immediate future, albeit more slowly.

Vietnam’s economic development, however, faces significant challenges. Labor productivity has slowed considerably, and poverty threatens to creep back into rural areas. However, the government is aware of these dangers and remains committed to reforms. It’s also discussing significant investments in skills development, infrastructure and agricultural modernization to fuel growth.

Sources:
  • https://en.wikipedia.org/wiki/List_of_countries_by_GDP_
  • https://en.wikipedia.org/wiki/Mixed_economy
  • https://en.wikipedia.org/wiki/Economy_of_Vietnam
  • http://www.worldbank.org/en/country/Vietnam/overview

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