Vietnam: Country Context
Vietnam is a thriving player in the global economy, with a consistently strong economic growth. The country is a hub for manufacturing and a leader in exporting goods. Since the launch of its economic reforms (Doi Moi) in 1986, Vietnam has transformed into a dynamic middle-income economy. Over the past decades, it has made remarkable progress in human development, social inclusion, and poverty reduction, aligning with key UN Sustainable Development Goals. Its open economy has attracted substantial foreign direct investment, spurring growth in the manufacturing and service sectors. Still, Vietnam’s economic growth has largely been input-driven, relying on low-cost labor, cheap energy, and favorable tax regimes. The country will need to shift towards higher-value activities to remain competitive.
Vietnam’s integration into global markets has been driven by key milestones, such as joining ASEAN in 1995, the WTO in 2007, and signing recent trade agreements like the EU-Vietnam FTA and the Regional Comprehensive Economic Partnership. As a result of these efforts, Vietnam has positioned itself as one of the fastest-growing economies in the region. However, labor productivity needs to increase, and the country’s aging population raises concerns about Vietnam's ability to maintain its current growth trajectory. The risk of falling into the middle-income trap looms unless further reforms are undertaken to increase productivity, stimulate private investment, and improve public sector efficiency.
Financially, Vietnam has also been resilient, recovering quickly after Covid-19 and global financial crises. However, Vietnam faces high vulnerability to climate change impacts and the rapid industrialization that fueled its growth has come at the expense of environmental sustainability, with significant degradation of natural resources and biodiversity. Pollution, inefficient resource use, and weak enforcement of environmental standards pose serious threats to sustainable development and the quality of life in Vietnam.
Recent reforms offer hope for a more sustainable future. Vietnam is focusing on clean energy, urban development, and climate adaptation. By continuing to improve innovation and sustainability, Vietnam can move towards a resilient economy, positioning itself to achieve high-income status by 2045.