Vietnam had a bumper year in 2024 based on GDP figures alone. Released on Monday, data from the General Office of Statistics, found that the economy had increased in size by 7.09 percent, a significant jump from the 5.05 percent it recorded in 2023.
But that’s not to say Vietnam is on a sure footing heading into 2025 (it actually looks more to the contrary) or that everyone was a winner.
Indeed, the State Bank of Vietnam, for one, has paid a price for Vietnam’s economic success in 2024. At the end of the year, the central bank had only around US$80 billion left in its foreign currency reserves down from around US$90 billion at the end of 2023 and over US$100 billion back in 2022.
This comes after gold prices spiked at the start of the year, with local gold bars at times commanding prices at a 20 percent premium to their world gold counterparts. This led to key decision-makers instructing the State Bank to bring the local gold price down (it’s not exactly clear why). Regardless, it did this by selling gold from its stockpile to the tune of at least 51,556 taels equivalent to about 13.28 tons which at today’s world gold price would be worth about US$1.13 billion.
But this only accounted for a small fraction of the bank’s shrinking foreign currency reserves. The rest came from the sale of US dollars to try to keep the local currency from devaluing as inflation raged in the US which saw interest rates on the other side of the Pacific soar.
All up the State Bank spent an estimated US$9.4 billion.
Interestingly, these sizable government market interventions were happening at the same time as the Ministry of Industry and Trade was petitioning the US Department of Commerce to drop Vietnam’s non-market economy status.
This was not approved, which in this context is not surprising, though there was much more to it than simply currency market interventions, with the decision accompanied by a 284-page memorandum that broke down Vietnam’s somewhat unorthodox economic policies and process into very fine detail.
Not that this would necessarily have a significant impact on the Vietnamese economy. A change would only really have meant marginally better outcomes for Vietnam in trade remedies cases.
Moreover, this adverse outcome seemed to have very little, if any, impact on foreign direct investment inflows. In total, the country recorded new registered capital to the tune of just over US$38 billion. The bulk of these funds came from Singapore (US$10.2 billion), South Korea (US$7.1 billion), and China (US$4.7 billion).
On that note, the business environment also improved a little for foreign firms with an Investment Support Fund approved offering foreign tech firms investing in Vietnam cashback on training and research and development activities carried out in the country.
A Direct Power Purchase Agreement mechanism also became a reality paving the way for foreign firms to shore up their green credentials in lieu of Vietnam having a clear direction in terms of its clean energy transition.
In fact, at times in 2024, it looked a lot like Vietnam might even be sliding backward on its clean energy commitments with big clean energy players like Norway’s Equinor, Denmark’s Ørsted, and Italy’s Enel announcing they would exit the market.
On top of that there was also a significant shift in power policy with the state power prioritising coal power production over hydro in order to preserve the latter for a rainy day. This saw coal imports spike, recording a 24.8 percent increase in terms of volume for the year.
But it wasn’t just the coal trade that was booming, almost all import-export sectors recorded strong year-on-year growth with two-way trade reaching over US$780 billion with a surplus for Vietnam of almost US$25 billion.
This was at least in part driven by Vietnam’s myriad of free trade agreements through which tariffs continue to fall opening up new markets. Incidentally, it was these trade agreements that also influenced the revised Law on Trade Unions which passed the National Assembly at the end of the year. In theory, this should clear the way for independent trade unions to form in Vietnam, which would bring it in line with its CPTPP and EVFTA commitments on workers’ rights.
This wasn’t the only win for Vietnamese workers, either.
The average wage, for example, jumped about 12.3 percent led by the agriculture, forestry and fisheries sector with wage growth of 14.29 percent; followed by the services sector where wages increased 11.29 percent; with the industrial sector bringing up the rear with an increase of 11.11 percent.
Moreover, a new minimum wage kicked in at the start of July that saw Vietnam’s lowest paid workers get a boost in their paychecks of about 6 percent.
Furthermore, government workers saw the base salary, which is multiplied by a coefficient depending on a government employee’s role to determine a worker’s salary, increased by about 30 percent.
There was notably some speculation that this might put upward pressure on inflation, however, this never really materialised with Vietnam’s Consumer Price Index actually recording a significant drop between July and September from 4.36 percent to 2.63 percent, the latter around which it would hover for the rest of the year.
This is particularly pertinent in light of these relatively high GDP growth numbers in that it may indicate that Vietnamese consumers are saving money rather than spending which is further supported by year-on-year retail sales increasing by just 2.55 percent.
That is to say, that in 2024, whereas the economy pulled some fairly respectable GDP growth numbers, Vietnam’s economy did not move as one and is moving into 2025 in much the same way. With this in mind, it’s difficult to predict what might happen as the year progresses suffice to say, 2024 was a mixed bag for Vietnam’s economy and 2025 likely will be too.