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The Impact of the Ukraine War on Vietnam’s Economy: Unpacked

The Ukraine War has not been kind to Vietnam’s economy. Tourism, trade, and foreign direct investment have all taken a direct hit, not to mention the indirect impacts of the greater global economic challenges the war has precipitated. With this in mind, and the President of Russia due to land in Hanoi later today, this article looks at how the Ukraine War has impacted Vietnam’s economy.


Russian President Vladimir Putin is due to arrive in Hanoi later today for a two-day visit to the Vietnamese capital. This is in line with Vietnam’s ‘bamboo diplomacy’ approach to international relations through which Vietnam, more-or-less, stays out of international conflicts in which it is not directly implicated.

But whereas this visit has been heavily criticised, Vietnam’s ‘bamboo diplomacy’ has worked well for the country in the past.

In the case of the ongoing trade conflict between the United States and China, for example, Vietnam has seen investment from both parties pour into the country and high profile visits and subsequent pledges of economic support from each.

That said, past performance is not always an indicator of future results, and in the case of the war in Eastern Europe, Vietnam does not only appear to have not realised any benefits but may also be paying a price.

Take tourism for example.

In 2019, Vietnam welcomed 646,524 tourists from Russia. In 2023 that number was just 125,610. Not to mention how this might have impacted foreign arrivals from Ukraine for which Vietnam Tourism does not publish specific numbers but it would be safe to assume have also experienced a decline.

And that’s just the tip of the iceberg with trade between these countries down, too.

Specifically, in 2019, two-way trade with Russia totalled just shy of US$4.5 billion, according to Vietnam Customs data. However, in 2023, two-way trade had fallen by a little more than 19 percent to US$3.63 billion. The bulk of this decline was in Vietnam’s exports to Russia, with the Southeast Asian nation shifting from a trade surplus of US$841.2 million in 2019 to a deficit of US$144.2 million last year.

It’s a similar story with Ukraine. Two-way trade in 2019 was US$369.4 million, however, in 2023 it was just US$258.2 million, a fall of just over 31 percent. Again the loss was mostly in exports from Vietnam to the war-ravaged Eastern European nation, which were down by about 85 percent. This gave Vietnam a trade deficit of US$181.3 million last year in contrast to a trade surplus with Ukraine of US$125.7 million in 2019.

But it’s not just tourism and trade, foreign direct investment has taken a hit as well.

In 2019, Russia launched 13 projects in Vietnam contributing capital to the tune of US$30.61 million. In 2023, however, new capital contributed to Russian projects fell by nearly half, reaching just US$16.47 million across 23 projects.

Again, it was a similar story for Ukraine with new foreign direct investment in 2023 reaching just US$995,000 down from US$4.8 million in 2019.

But there have been indirect impacts that have possibly been more detrimental to Vietnam, too.

The spike in oil prices when the war began triggered a rapid rise in inflation in the European Union and the United States which has had big implications for Vietnam’s economy. As key buyers of Vietnam’s export goods, when consumers in these two markets tightened their belts manufacturing orders in Vietnam took a dive.

This also triggered rising interest rates in these two key markets increasing demand for US dollars and Euro–not only was economic growth slowing down but the Vietnamese dong was losing value too. This, at least in part, saw Vietnam record GDP growth of just 5.05 percent in 2023, based on data from Vietnam’s General Statistics Office. This was well short of its 6.5 percent target.

All of this is to say that Vietnam’s ‘bamboo diplomacy’ approach to its relationship with Russia may not be in its best economic interests.

That said, there is of course more at play than just economics and business. 

For one, Russia has been a key arms supplier to Vietnam for years now–between 1995 and 2022 it accounted for 81.5 percent of Vietnam’s arms imports worth US$7.47 billion. This suggests a sizable defence dependence on parts and artillery from its neighbour to the far north.

Furthermore, Russia and Vietnam have a decades-old relationship that dates back to the Cold War during which they shared deep ideological bonds. Statues of Vladimir Lenin are all over Vietnam and likewise, monuments to Ho Chi Minh pockmark Russia. In this context, and with relationships incredibly powerful tools with respect to getting things done and making decisions in Vietnam, these economic costs might not be an issue.

That said, the reality is that should the war continue, many of the aforementioned economic challenges it has created for Vietnam, will likely continue too.

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