Key endeavors

How do you see Vietnam’s economic outlook in 2024? What have been and will be the key drivers boosting economic growth?

2024 has been a challenging year. The first two quarters were a slow start. We had all hoped that the Year of the Dragon would be one of expansion and opportunity, but the start of the year was a little slow. The numbers in the third quarter, however, have been quite strong.

We saw GDP growth of 7.4 per cent and, as a result, HSBC amended its annual forecast to 7 per cent, following the original 6.5 per cent. We have seen a very strong pickup in trade volumes, with exports up 15.3 per cent, and this has really propelled the economy forward. At the moment, we can clearly see that the FDI story, the export story, and the tourism story are all very strong.

However, there remain some weakness in the domestic economy. Consumers aren’t spending to the same extent they were previously, but signs of that turning round are being seen as confidence returns among Vietnamese consumers. As a result, we remain quite optimistic about 2025, and our growth forecast is 6.5 per cent.

Amid its green transformation, Vietnam must seek breakthrough measures to adapt to the new circumstances, in particular effectively taking advantage of opportunities from Industry 4.0, with a focus on digital transformation. How would you evaluate this “twin transformation” in Vietnam?

The digital and green transformations are very important for Vietnam’s economy. We saw what happened with Typhoon Yagi in Vietnam and with Hurricane Helen and Hurricane Milton in the US. The impact of climate change is very real, affecting everyone’s life. Vietnam, I think, has taken some rather bold steps in this regard.

Its commitment to reaching net-zero emissions by 2050 is a very positive move. The country has acted ahead of major Asian economies like China, Indonesia, and India. Based on what Vietnamese companies are telling us, roughly 40 per cent are already active in undertaking steps to address climate change and 58.7 per cent said that the net-zero target is necessary. The government has a very clear policy on this, and clearly more needs to be done. But Vietnam is also in a very positive position, insofar as it has significant natural resources for renewable energy, whether it’s wind, given its long coastline, or solar power, given the sunlight coverage in the country, or in hydroelectric power, particularly here in the north. So, progress has been made.

There is more to be done, but I think that Vietnam has the right level of momentum. On the digital side, it is very fortunate to have such a young population. Roughly 80 per cent of its people use the internet and 70 million use a smartphone. The levels of internet penetration and smartphone coverage are very, very high. It also has a number of unicorns in the tech space, such as VNPay and MoMo.

I think Vietnam has the ability to leapfrog other countries when it comes to the digital space. It has the fastest-growing digital economy in ASEAN, and is ranked second after Indonesia in digital shopping transactions. So, the foundations are there.

Vietnam’s young population is willing to accept new technology. I believe the future looks bright.

What are the challenges and obstacles to Vietnam implementing digital and green transformations?

I think the challenges in the green space are around funding. Vietnam needs to outlay roughly $400 billion by 2040, which is a huge amount and cannot only come just from the State. It must also come from the private sector. And a lot of this investment must be long term.

I think probably one of the greatest challenges is how can Vietnam be sufficiently attractive for investors to come in and invest in big projects that will have a significant impact on the economy.

Investment is a problem overall. The world is spending $4 trillion on transformation in the digital space. Forty-seven per cent of Vietnamese companies say they are already looking at digital transformation. But, again, it comes down to whether Vietnam has the resources to be able to invest the right amount at the right time, to have a meaningful impact.

How can investment in the digital and green transformations be attracted?

Foreign investors have options. They will go where they get the best terms and where they get the best returns. What I would just say to the Vietnamese Government, and it knows how to do it, because it did it in the FDI space in manufacturing, is bear in mind that you are competing with other markets, and make sure that you have a proposition that is competitive to foreign investors, that will make Vietnam more attractive than other markets. This comes down to the laws around investment; the administrative processes surrounding it. As long as you can make all of that more competitive, I think Vietnam will continue to be successful. If we look at the level of FDI coming into the country for manufacturing, Vietnam has a very positive story to tell, and it needs to take that story and do something similar in the renewable energy space.

What should the government do to promote the digital and green transformations?

I think one of the challenges that everyone faces is a concept called “greenwashing”, which is where companies only pretend to conduct activities that are considered “green” and positive for the environment. And that is very risky, as the country is not prepared to support such actions, and financial institutions should not support such actions. If a project or product is labeled green, it needs be genuinely green, so authorities, companies, and consumers must identify if it is indeed genuinely green. Green financing can then be provided, if feasible, because at the end of the day, banks and investors invest in the expectation that positive returns will come.

What do you forecast for Vietnam’s economy in 2024 and the years ahead, especially growth in the green economy?

HSBC’s view is that Vietnam will finish this year with GDP growth of around 7 per cent, which will make it the best performing economy in ASEAN.

Next year, we should see around 6.5 per cent GDP growth, which is still a big number, because Vietnam’s economy, as it grows, is still adding roughly $40-50 billion of additional GDP every year. That’s equivalent to the Dutch economy, by way of comparison.

We see Vietnam growing considerably next year, at 6.5 per cent, primarily driven by trade. We expect its trade numbers to remain positive. We have seen interest rates being cut in the US, so hopefully US consumers will start spending a little bit more, which is critical for Vietnam’s export story.

HSBC also hopes that tourism numbers stay where they are. Vietnam has had a very good tourism story, attracting a lot of visitors. We are back now to numbers that are, I think, above those in 2019. The final leg in Vietnam’s economic growth is that as domestic consumers become confident in the future, they will spend a bit more, and we will see a substantial increase in local retail sales.

Generally, if all these things happen Vietnam will post 6.5 per cent growth next year.