Vietnam's Trade-Oriented Economy Faces Global Challenges

As a trade-oriented economy, Vietnam's imports and exports represent nearly 170% of its GDP, making it highly susceptible to changes in global trade policies. The U.S. is Vietnam's largest export destination, accounting for 30% of total exports, while China supplies 38% of its imports.

Consumer Confidence and Financial Sector Vulnerabilities

Uncertainty in the global market could further dampen consumer confidence and spending, which has not kept pace with GDP growth in recent years. The World Bank highlights persistent vulnerabilities in the financial sector, with the average loan-loss coverage ratio among 26 banks at 83%, a significant drop from 150% in 2022.

Market vendors in Hau Giang Province, southern Vietnam, in January 2025. Photo by VnExpress

External Risks and Poverty Reduction

The World Bank warns that stronger-than-expected trade policy distortions could negatively impact Vietnam's exports and growth. Despite these challenges, poverty rates are declining, with the share of the population living on less than $3.65 per day expected to drop from 3.8% in 2024 to 3.6% in 2025.

Policy Recommendations for Sustainable Growth

Experts suggest focusing on expanding public investment, mitigating fiscal risks, and implementing structural reforms. Fiscal policy could support growth by addressing infrastructure gaps, while further financial sector reforms are crucial for resilience and stability.

Long-Term Growth Prospects

Vietnam's medium-term growth outlook is positive, with GDP growth projected to rebound to 6.1% in 2026 and 6.4% in 2027. Achieving this potential requires a stable international economic environment and domestic reforms aimed at boosting productivity, investing in human capital, and greening the economy.