Taking Stock: Viet Nam Economic Update, March 2025

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Part I. Recent Economic Developments and Prospects

Viet Nam’s GDP growth is forecast to moderate to 6.8 percent in 2025 before settling at 6.5 percent in 2026. The rebound in exports  in 2024 is expected to ease in 2025 and further into 2026 due to projected economic slowdown in China and the United States in the near-team - Viet Nam’s largest trade partners – and uncertain global trade prospects from shifts in trade policy. Domestic activities and services are expected to continue to firm up in 2025 and into 2026 as the real estate market recovery gathers steam.

The outlook for Viet Nam remains positive but with heightened uncertainties. Given Viet Nam’s openness to the global economy, the main uncertainty stems from slower-than-expected global growth and trade disruptions, particularly among major trading partners such as the United States, European Union, and China. Such developments, including heightened uncertainties from trade policy shifts and deepening trade fragmentation, could impact Viet Nam’s manufacturing exports, industrial production, and growth. On the other hand, increased public investment could further support demand and contribute to growth. An accelerated recovery in the real estate market thanks to faster project clearance could further boost domestic demand.

Policies to support growth should focus on expanding public investments, mitigating financial sector risks, building energy resilience, and engaging in structural reforms.

• First, while the economy is projected to register robust growth in 2025-2026, existing infrastructure gaps call for greater investments. Existing fiscal space and optimized public investment management could provide resources essential for these projects to secure sustainable growth dynamics for the medium to long term, particularly in the energy, logistics and transport sectors.
• Second, building on recent reforms, further steps to mitigate financial sector risks and vulnerabilities remain crucial. The authorities could encourage banks to improve capital adequacy ratios and strengthen the institutional framework and SBV mandate for prudential supervision (including to detect and address issues arising from affiliation of banks with business groups) and early interventions (early identification of problems and crisis prevention).
• Third, building energy resilience can mitigate supply risks that could constrain growth. Operationalizing targets set out in the National Energy Efficiency Plan (VNEEP 3) would improve industry productivity and reduce energy intensity. Avoiding delays in the development of planned generation capacity and licensing will be key for ensuring energy security. Improving pricing and procurement framework would also ensure that the planned increase of renewable generation capacity are met. Finally, structural reforms are crucial to sustain long-term growth, including strengthening the regulatory environment in critical backbone services, greening the economy, building human capital and deepening trade integration and integration of the domestic private ecosystem into global value chains.

Part II. E-mobility transition

Viet Nam has set ambitious goals to decarbonize its economy by 2050. At the United Nation’s Climate Change Conference in Glasgow in November 2021 (COP26), the Prime Minister of Viet Nam made an ambitious pledge to achieve economy-wide net zero emissions by 2050, which set into motion plans to decarbonize the transportation sector.

The energy sector is the biggest contributor to GHG emissions, of which transport is a main driver. Without decarbonation, this share would rise significantly with the rapid increase in car use. The transport sector in Viet Nam accounted for about 32.9 million tons of carbon dioxide equivalent (MtCO2eq) in 2021, or 7.2 percent of total economy-wide GHG emissions, the majority of which are generated from road transport. Although car ownership remains a luxury for most Vietnamese today, a growing middle class is fueling auto sales at a compounded average growth rate of 15 percent between 2010 – 2022, among the fastest in the region. Viet Nam is well positioned to benefit from its nascent car motorization and leapfrog over traditional cars and into EVs.

E-mobility transition in Viet Nam would also require the transition of the two-wheeler (2W) segment to electric 2Ws (E-2Ws) given that they will remain the dominant vehicle choice until 2035. In 2022, the registered 2Ws in Viet Nam reached 72.16 million (ca. 94 percent of the total registered vehicles stock). This represents a motorization rate of close to 518 units of 2Ws per 1,000 population – in sharp contrast to the rate for passenger cars (PCs) at about 22 units per 1,000 population. E-Mobility transition will be driven by the uptake of electric 2Ws (E-2Ws), as it has been since 2014.

Moving towards electric mobility also represents significant economic opportunities. To achieve the EV uptake targets, EV sales in Viet Nam need to increase from 500,000 units in 2022 to about 1.5 million units by 2030, and 7.3 million by 2050. Cumulatively, this represents a market demand for EVs of all kinds of more than 7 million between 2024-2030, and 71 million between 2031-2050. Domestic EV market evolution is expected to yield significant growth in the entire EV value chain including vehicle and battery production as well as charging infrastructure. Additional demand is also expected for the fields of EV maintenance and recycling, opening up the labor market for new competent positions. Reaching e-mobility transition is estimated to generate up to 6.5 million new jobs cumulatively over 2050 across the EV Value Chain, of which 61 percent from the EV charging infrastructure industry.

A set of recommendations were developed to help the Government of Viet Nam achieve its targets for E-mobility transition. The targets set under the Decision 876/QD-TTg related to transitioning the road transportation sector towards electric mobility (E-Mobility) using electric vehicles (EVs) – to have 50 percent of urban vehicles and 100 urban buses and taxi to be powered by electricity or green energy by 2030, and subsequently reach to 100 percent for all road vehicles by 2050. The recommendations include:

• Establish a cross-ministerial governing body for steering the E-mobility across the EV ecosystem throughout the transition period.
• Encourage the update of EVs across all vehicle categories by addressing existing gaps and concerns and providing future incentives including via the development of charging infrastructure.
• Prepare the power sector for upcoming EV charging impact by (i) integrating projected EV charging impact to the power system in the next power development planning update (ii) increase the investment planned for power generation supply incorporating EV charging demand (iii) increase investment for power network capacity for transmission and distribution  (iv) promote  smart charging by introducing differentiated electricity tariffs, encouraging the installation of smart chargers for off-peak charging and encouraging the development of behind-the-meter rooftop solar at public charging stations
• Promote transport demand modal shift (i) from personal car to public mass transit and from intercity commercial buses to railways; and (ii) from trucks to railway sand waterway transport for intercity freight transport.