A consumer shops in a supermarket in Tây Ninh Province. Domestic consumption is becoming an important growth driver of the Vietnamese economy. — VNA/VNS Photo Minh Phú

The domestic retail market is expected to regain momentum on increasing incomes and rising middle class to drive economic recovery this year.

Director of the General Statistics Office Nguyễn Thị Hương said that the services sector is expected to remain the spotlight of the economy this year, fuelled by trade and consumption policies which will promote sectors such as airline transportation, wholesale and retail, accommodation and catering, financial and tourism services.

The total retail sales of goods and services reported an impressive growth rate of 9.6 per cent to reach VNĐ6.232 quadrillion (US$252 billion), demonstrating that domestic consumption is becoming an important growth driver of the Vietnamese economy.

Analysts of VnDirect Securities Company also pointed out that the increase in the number of tourists will boost accommodation, catering and entertainment services, which will help improve consumption demand significantly.

The recoveries in industrial production, employment and wages will contribute to strengthening domestic demand. Besides, the Government is implementing salary reform from July 1.

The domestic retail market is estimated at $140 billion currently, and is expected to reach $350 billion by 2025 and contribute 59 per cent of the country’s gross domestic product.

The domestic market is considered to have high potential for retailers, with rising incomes and growing middle class, experts say.

According to Đỗ Thiên Anh Tuấn, domestic consumption accounts for 60-65 per cent of GDP, in which spending of households is estimated at 50-55 per cent of GDP.

Việt Nam has a population of 100 million, of which 20 million are middle class. It is forecast that more than 4 million will join the middle class by 2026.

It is essential to stimulate domestic demand in association with the campaign “Vietnamese prioritise Vietnamese products”, Tuấn said.

Việt Nam should raise policies to further promote the campaign. For example, the reduction of value added tax from 10 per cent to 8 per cent should be extended to create momentum for domestic consumption. In addition, reductions in corporate income tax and personal income tax should be considered.

Tuấn also said that it was important to promote the development of the domestic distribution systems which would pave the way for the expansion of Vietnamese goods in the domestic market.

In Việt Nam, on average, every 100,000 people would need a hypermarket and a shopping centre, every 10,000 would need a medium-sized supermarket and every 1,000 would need around 1-3 convenience stores.

According to Nguyễn Anh Đức, President of Việt Nam Retail Association, solutions should be raised to support domestic producers and distributors to promote the development of the domestic market.

Besides, industries and sectors should enhance linkage to create strength rather than compete.

According to VnDirect Securities Company, the trend of reducing lending rates should be maintained, which is important to promote the domestic market. When incomes improve, consumer lending will return, expected from the second half of 2024. — VNS