The head of Vietnam Airlines has told a conference the airline is expecting a pre-tax profit of VND 7,300 billion or about US$286.4 million. Whereas at face value this looks to be good news for the airline, the reality is that its situation is much more complex.

VN Express, for example, has noted that the announcement was not accompanied with an explanation for the record profit. It goes on to point out that the company had a VND 4,500 billion or US$176.6 million windfall earlier in the year when the lessor of several jets to its subsidiary Pacific Airlines cancelled the company’s outstanding debts in exchange for the return of the planes. This left Pacific Airlines with no aircraft.

Moreover, the publication points out that Vietnam Airlines still has an accumulated debt of VND 35,000 billion or about US$1.4 billion.

Dong Nghiep Hoi Nhap has also noted that the airline is expecting a drop in revenue in 2025 of 17 percent, but also an increase in passenger numbers and cargo.

Furthermore, back in June, the airline went hat in hand to the National Assembly to request an extension of an interest-free loan it had acquired from the government that was set to fall due, without which it was speculated the airline would be insolvent. This was, fortunately for the airline, approved.

That is to say, that together these factors would support the thesis that the record profit is not necessarily a sign of a better business but is, instead, an anomaly and the challenges facing the airline seem likely to persist.

Banking and Finance News

State Bank continues open market operations

The State Bank of Vietnam, alongside selling US dollars, has also continued to carry out open market operations. Specifically, there were US$961 million worth of reverse repos outstanding as of close of business January 2 and US$4.55 billion in treasury bills outstanding.

Vietnam central bank sets credit growth limit/target for 2025 at 16 percent

The State Bank has set a credit growth target for 2025 of 16 percent. This is up from a 15 percent target in 2024. The State Bank has made clear that this is at the direction of the National Assembly, the Prime Minister, and the government.

Of note, whereas Vietnam in the first instance introduced credit growth limits to stymie out-of-control inflation, it has since reorientated credit growth policy to facilitate economic growth. This is seeing private debt rise rapidly along with bad debts.

As it stands, Vietnam’s private debt to GDP is sitting around 136 percent of GDP. If it hits this new 16 percent target then that should see debt to GDP at the end of next year somewhere around 148 percent of GDP.

Gaming news

Vietnam casino to stop admitting locals from 2025

The Corona Casino in Vietnam’s Phu Quoc, permitted to admit local patrons as part of a pilot program initiated in 2019 just before the COVID-19 pandemic, will no longer do so from January 1. In an announcement on its website the Casino has posited that this will be only temporary though it’s not clear why that may be the case.

Of note, this does not seem to have been covered by the local press. Though it’s not immediately clear why, it could suggest there is some sensitivity around the issue, but this is very speculative.

It is, however, newsworthy in that Vietnam has been toying with the idea of legalised gambling for a few years now with illegal gambling rife and the tax gains made from legalising the practice likely to be huge. With this in mind, the final assessment of the pilot program will likely hold crucial insights into the future development of the industry.

Labour news

Vietnam fertility rate hits new low, possible labour shortages on horizon

Vietnam’s fertility rate fell to 1.91 children per woman in 2024 down from 1.96 in 2023, and well below the 2.1 replacement rate needed. This has been raised as a concern in the context of its impact on Vietnam’s labour supply.

Vietnam Plus is covering the issue by looking at the root causes. It’s citing Le Thanh Dung, Director of the Department of Population, saying that couples are waiting longer to have children in order to pursue higher education and career development, as well as due to economic pressures.

Notably, there have been some policies put in place to tackle low birth rates with Ho Chi Minh City receiving a lot of attention for a plan to reward women under 35 who have two children with VND 3 million (about US$120). However, Tuoi Tre is citing Pham Chanh Trung, Head of the Ho Chi Minh City Population Department, as saying this scheme is unlikely to have an impact on birthrates.

Phap Luat on the other hand is carrying comments from Hoang Thi Diem Tuyet, Director of Hung Vuong Hospital, who is calling on health insurance companies to cover the cost of fertility treatment. This article does, however, go on to explore fertility treatments in the medical tourism space and the point becomes a little confused.

Real estate news

Vietnam housing supply in 2024 just 7 percent of pre-pandemic levels

Vietnam’s housing supply reached just seven percent of its pre-pandemic levels in 2024, according to a report from the Vietnam Association of Realtors. Note that official Ministry of Construction data will be released around the middle of January.

Of note, Nha Dau Tu has highlighted that 62 percent of the new housing supply in 2024 came from five big developers, namely Vinhomes, CapitalLand, Masterise, MIK, and Sungroup. Notably absent from the list is Novaland which had at one time reportedly been Vietnam’s second biggest developer but has faced a number of challenges since the housing market collapse back in 2022.

The Leader, on the other hand, has put an emphasis on the increase in selling prices with prices in Hanoi up 72.9 percent over the second quarter of 2019, and 49.9 percent in Danang and 34.3 percent in Ho Chi Minh City over the same period.

Whereas this development has largely been heralded as a sign the housing market is starting to recover, 7 percent is a very small number and using this figure to support the thesis that the market is in a state of recovery may be somewhat presumptive.

Stock market news

Foreign traders return to stock market, net-buy US$8.5 million

Over the last five trading sessions to the close of business on January 2, foreign investors net-bought US$8.5 million worth of HCMC Stock Exchange stocks. This is a welcome change after months of mass withdrawals from the exchange by foreign investors. Last year, in total, foreign investors net-withdrew a total of US$3.56 billion.

Foreign trader activity, last five trading days

	Buy		Sell		Change
Date	VND	US$	VND	US$	VND	US$
26/12	1,303	$51,183,345	1,668	$65,520,966	-365	-$14,337,622
27/12	1,826	$71,727,389	1,208	$47,451,635	618	$24,275,754
30/12	1,468	$57,664,735	1,109	$43,562,801	359	$14,101,935
31/12	911	$35,785,132	1,212	$47,608,760	-301	-$11,823,628
2/1	1,105	$43,405,676	1,201	$47,176,667	-96	-$3,770,991
Total	6,613	$259,766,277	6,398	$251,320,829	215	$8,445,448

VND = billions; Source: Vietnam Stock Market Tracker

Tax news

Vietnam Environment Tax cut extended to end 2025

A 50 percent cut to Vietnam’s Environment Tax on jet fuel, petrol, and grease, first implemented as a COVID-19 economic stimulus measure, will be extended to the end of next year. The tax cut was originally set to end on the first of January.

Of note, Kinh Te Thi Doi has pointed out that the same tax reduction in 2023 put a dent in the national budget to the tune of VND 34,473 billion or US$1.35 billion. It does, however, argue that the cuts are an effective economic stimulant.

Thanh Nien, on the other hand, has pointed out that this is the fifth time a reduction has been approved in the Environment Tax since it was implemented six years ago.

Neither publication, however, has mentioned the original purpose of the tax which was to reduce the use of fossil fuels and subsequently air pollution, despite Vietnam’s commitment to reaching net-zero by 2050.

With this in mind, this tax cut extension adds to the mixed messages Vietnam has been sending on its carbon reduction commitments.

The week ahead

There are a handful of events coming up. For more information see the: Doing Business in Vietnam: Events Directory 2024

Also, Vietnam is a dynamic market that is changing rapidly. To keep updated to date with the business environment and how it is evolving make sure to subscribe to the-shiv.

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