Vietnam’s economy surged in 2024, recording its highest GDP growth since 2020 at 8.32%. Exports climbed sharply, foreign direct investment rebounded, and macroeconomic stability was maintained, defying earlier pessimistic forecasts.

However, Dr. Nguyen Dinh Cung, former Director of the Central Institute for Economic Management, warns that growth remains fragile. Without bold reforms, the country risks losing momentum.

In an exclusive interview with VietNamNet, he discusses Vietnam’s economic outlook, the urgency of institutional reform, and the historic opportunity to reshape the nation’s future.

Reflecting on the past year, Dr. Cung emphasizes that Vietnam’s economic performance in 2024 exceeded expectations.

The primary drivers of this surge were a strong recovery in industrial production and a sharp rise in exports, fueled by increasing demand from key global markets. Industrial production grew by 8.32%, the highest rate since 2020, while exports played a crucial role in boosting economic momentum. Foreign direct investment inflows also recovered, rising by 10.6% compared to the previous year.

Despite these impressive numbers, Dr. Cung warns that the final months of 2024 saw signs of weakening growth. Industrial production and export growth slowed, signaling that Vietnam cannot rely solely on external demand to sustain its economic expansion.

He highlights domestic investment as a weak link in the economy. While FDI surged, private sector investment within the country remained sluggish, growing by only 7.7%, significantly lower than the 13.6% average between 2014 and 2019. Public investment also declined sharply, growing by just 3.3%, a stark contrast to the 19% average in 2022 and 2023.

Looking ahead to 2025, Dr. Cung warns of growing global uncertainties that could impact Vietnam’s economy.

The potential return of Donald Trump to the U.S. presidency raises concerns about new tariffs on Vietnamese exports, which could disrupt trade and investment flows.

There is also the risk of Vietnam being used as a transit hub for Chinese exports to the U.S., which could trigger trade restrictions.

Additionally, a stronger U.S. dollar and rising interest rates could limit Vietnam’s ability to lower borrowing costs, reducing credit growth. Supply chain disruptions and ongoing geopolitical tensions add further uncertainty.

Despite these challenges, Vietnam has a unique opportunity to attract supply chains relocating from China. Dr. Cung stresses that now is the time for bold institutional reform.

For years, Vietnam’s growth potential has been hindered by bureaucratic inefficiencies and regulatory roadblocks.

He believes the country finally has the political will, public support, and leadership commitment needed to break through long-standing institutional bottlenecks.

To capitalize on this momentum, he emphasizes the need for deregulation and cutting red tape. He urges the government to abandon the mindset of "if we can’t regulate it, we ban it" and instead shift toward a model where businesses have more freedom to innovate. Instead of excessive pre-approval processes, Vietnam should adopt a post-implementation oversight approach, allowing companies to operate with greater flexibility.

Streamlining laws and removing inconsistencies is another critical step. Many regulations contradict each other, creating confusion and inefficiencies for businesses and investors. Dr. Cung advocates for a single, comprehensive investment law to replace overlapping regulations that currently slow down economic activity.

Decentralization is also key to unlocking Vietnam’s full economic potential. Dr. Cung calls for greater autonomy for local governments, allowing them to make economic decisions under the principle of “local governments decide, local governments act, local governments take responsibility.” This shift would empower provinces and cities to drive growth in ways that best suit their unique circumstances.

Market-driven land and investment policies must replace the current state-controlled allocation system, ensuring that land-use rights and business opportunities are distributed efficiently.

Eliminating excessive business regulations is essential, as Dr. Cung believes at least two-thirds of all “conditional business sectors” should be removed to foster a more dynamic and competitive market environment.

Ending the entrenched “ask-and-give” mechanism, where businesses must seek government approval for various permits, is another fundamental reform.

Dr. Cung argues that removing bureaucratic licensing procedures will accelerate economic growth by allowing enterprises to focus on expansion rather than navigating red tape.

He also supports the government’s new policy of setting explicit growth targets for provinces. He believes that formally assigning each province a GDP growth target, job creation target, and per capita income target will create stronger accountability. High expectations will push local leaders to be more innovative and proactive in driving economic progress.

However, decentralization must go further, giving provinces more flexibility in policy-making and investment decisions. Local governments should be judged on their overall economic impact rather than being penalized for individual project failures.

Dr. Cung concludes that Vietnam stands at a defining moment where policy decisions made today will shape the nation’s future for decades. With the right reforms, the country can unlock its full economic potential and establish itself as a leading powerhouse in Asia.

Tu Giang & Lan Anh