Vietnam’s development over the past 30 years has been remarkable. Economic and political reforms under Đổi Mới, launched in 1986, have spurred rapid economic growth, transforming what was then one of the world’s poorest nations into a lower middle-income country. Between 2002 and 2018, more than 45 million people were lifted out of poverty. Poverty rates declined sharply from over 70% to below 6% (US$3.2/day PPP), and GDP per capita increased by 2.5 times, standing over US$2,500 in 2018.
In the medium-term, Vietnam’s economic outlook is positive, despite signs of cyclical moderation in growth. After peaking at 7.1% in 2018, real GDP growth in 2019 is projected to slightly decelerate in 2019, led by weaker external demand and continued tightening of credit and fiscal policies. Real GDP growth is projected to remain robust at around 6.5% in 2020 and 2021. Annual headline inflation has been stable for the seven consecutive years – at single digits, trending towards 4% and below in recent years. The external balance remains under control and should continue to be financed by strong FDI inflows which reached almost US$18 billion in 2018 – accounting for almost 24% of total investment in the economy.
Vietnam is experiencing rapid demographic and social change. Its population reached 97 million in 2018 (up from about 60 million in 1986) and is expected to expand to 120 million before moderating around 2050. Today, 70% of the population is under 35 years of age, with a life expectancy of 76 years, the highest among countries in the region at similar income levels. But the population is rapidly aging. And an emerging middle class, currently accounting for 13% of the population, is expected to reach 26% by 2026.
Vietnam ranks 48 out of 157 countries on the human capital index (HCI), second in ASEAN behind Singapore. A Vietnamese child born today will be 67% as productive when she grows up as she could be if she enjoyed complete education and full health. Vietnam’s HCI is highest among middle-income countries, but there are some disparities within the country, especially for ethnic minorities. There would also be a need to upgrade the skill of the workforce to create productive jobs at a large scale in the future.
Over the last thirty years, the provision of basic services has significantly improved. Access of households to modern infrastructure services has increased dramatically. As of 2016, 99% of the population used electricity as their main source of lighting, up from 14 % in 1993. Access to clean water in rural areas has also improved, up from 17% in 1993 to 70% in 2016, while that figure for urban areas is above 95%.
Vietnam performs well on general education. Coverage and learning outcomes are high and equitably achieved in primary schools — evidenced by remarkably high scores in the Program for International Student Assessment (PISA) in 2012 and 2015, where the performance of Vietnamese students exceeds that of many OECD countries. Health outcomes have improved in tandem with rising living standards. Between 1990 and 2015, the maternal mortality ratio fell from 139 to 54 deaths per 100,000 live births, and infant mortality dropped from 44 deaths per 1,000 live births to 16.7. Vietnam’s universal health coverage index is at 73 - higher than regional and global averages - with 87% of the population covered.
In Vietnam, however, rapid growth and industrialization have not been friendly to the environment and natural assets. Final energy consumption tripled over the past decade, growing faster than output. Energy intensity of GDP has been steadily increasing. Demand for water continues to increase, while water productivity is low, about 12 percent of global benchmarks. Unsustainable exploitation of natural assets such as sand, fisheries and timber could negatively affect potential for future and long-term growth. Compounding the problem is the reality that much of Vietnam’s population and economy is highly vulnerable to climate impacts.
Urbanization and strong economic and population growth are causing rapidly increasing waste management and pollution challenges. Waste generation in Vietnam is expected to double in less than 15 years. Linked to this is the issue of marine plastics. Ninety percent of global marine plastic pollution is estimated to come from just 10 in-land rivers, and the Mekong river is one of them. Vietnam is among the ten countries worldwide that are most affected by air pollution. Water pollution has significant costs on productivity of key sectors and human health.
The Government is aware of the need to lower the environmental footprint of the country’s growth, to effectively mitigate and adapt to climate change, and that addressing these challenges also present opportunities to contribute to growth. Key strategies and plans to stimulate green growth and sustainable use of its natural assets are in place. The Government is also implementing measures to mitigate and adapt to climate change and address extreme weather events and natural disasters by operationalizing its Nationally Determined Contribution. The Government is also seriously assessing how to urgently address water and air pollution, marine plastics and need for solid waste management.
Last Updated: Oct 18, 2019