Vietnam’s development record over the past 25 years is remarkable. Economic and political reforms under Đổi Mới, launched in 1986, have spurred rapid economic growth and development and transformed Vietnam from one of the world’s poorest to a lower middle-income country.
Vietnam has enjoyed strong economic growth. Since 1990, Vietnam’s GDP per capita growth has been among the fastest in the world, averaging 6.4 percent a year in the 2000s.. Vietnam’s economy continued to strengthen in 2015, with an estimated GDP growth rate of 6.7 percent. Vietnam’s economic activity moderated in the first half of 2016, with GDP expanding by 5.5 percent, compared to 6.3 percent over the same period in 2015. This slow-down is considered a result of severe drought--affecting agricultural production--and slower industrial growth.
Growth has been equitable—with a dramatic reduction in poverty—and social outcomes have improved significantly. Per capita income in Vietnam has gone from around $100 in the 1980s to about $2,100 in 2015. Using the 2011 Purchasing Power Parity (PPP) line of $1.90, the number of people living in extreme poverty has dropped from about 50 percent in the early 1990s to 3 percent in 2012. Social indicators in Vietnam have improved substantially over the last decades, with several Millennium Development Goals (MDGs) achieved ahead of time. The Vietnamese population is better educated and today has a higher life expectancy than most countries with similar per capita income. The maternal mortality ratio has dropped below the upper-middle-income country average, while the under-five mortality rate has been reduced by 50 percent, now slightly above the upper-MIC average. Access to basic infrastructure has also improved substantially: Electricity is available to almost all households, up from less than half in 1993, and access to clean water and modern sanitation has risen from less than 50 percent of all households to more than 75 percent.
Notwithstanding past achievements, the poverty agenda still needs attention. Poverty gains are fragile, as a significant share of the population is still vulnerable, living close to the poverty line (one third of the population—equivalent to about 30 million people—fall into the ‘poor’ or ‘near poor’ groups). The poor and extreme poor are concentrated among ethnic minority groups. While representing only 15 percent of the population, half of the nation’s poor belong to ethnic minorities. Furthermore, these groups are highly vulnerable to shocks from climate change, natural disasters, as well as economic and health shocks.
Climate risks and challenge loom. Vietnam is highly vulnerable to climate change and natural disasters, posing significant risk to development gains and further progress. Already, Vietnam is experiencing rising temperature and sea levels, stronger storms, floods, and droughts. Average economic losses amount to 1-1.5 percent of GDP over the past two decades.
Progress on macroeconomic fundamentals but an unfinished economic modernization and structural transformation agenda While Vietnam has made progress in improving macroeconomic fundamentals, more time is needed to solidify gains and further structural reforms.
Enhancing international integration to broaden economic opportunities. Vietnam has boosted its international economic integration as it has signed a number of free trade agreements, including with the Eurasian Economic Union, the European Union, South Korea, and the Trans-Pacific Partnership. At the same time, the ASEAN Economic Community was established on December 31, 2015, and is likely to create more opportunities for the country to integrate further with regional and global economies. While global integration has advanced well with Vietnam embedding itself in global value chains, the benefits are constrained by the absence of linkages with domestic firms.
The Government of Vietnam has showed determination for reforms. Vietnam’s 2011 – 2020 Socio-Economic Development Strategy (SEDS) gives attention to structural reforms, environmental sustainability, social equity and emerging issues of macroeconomic stability. It defines three "breakthrough areas": (i) promoting human resources/skills development (particularly skills for modern industry and innovation); (ii) improving market institutions, and (iii) infrastructure development. In addition to the elaboration of three SEDS breakthrough areas, the five-year Socio-Economic Development Plan (SEDP) for 2011-2015 focused on three critical restructuring areas – the banking sector, state-owned enterprises and public investment - that are needed to achieve these objectives. The SEDP for 2016-2020, approved in April 2016, acknowledges slow progress on certain SEDP reform priorities and emphasizes the need to accelerate these reforms over the next SEDP period, 2016-2020, to achieve targets set out in the 10-year strategy.
Last Updated: Sep 26, 2016