Vietnam's economy needs to shift from quantity to quality: ADB experts

Vietnam's economy has demonstrated robust growth, with GDP expanding by 8.18% in the latest period, including an 8.39% surge in the second quarter. However, experts from the Asian Development Bank (ADB) are urging a critical shift from quantity to quality in the nation's economic development. Shantanu Chakraborty, ADB Country Director for Vietnam, described the figures as highly encouraging, reflecting the economy's resilience against global headwinds and exceeding the bank's earlier forecasts. Bui Minh Giap, ADB's principal economist for Vietnam, noted that growth has been broad-based, supported by strong performances across industry, construction, services, exports, foreign direct investment (FDI), public investment, and a recovery in domestic demand. Despite these strong headline figures, experts caution that external uncertainties and domestic macroeconomic pressures remain significant. Vietnam's highly open economy, with total foreign trade around 170% of GDP, is vulnerable to fluctuations in global trade, tariff policies, and weakening demand in key export markets. A notable concern is the trend of imports rising faster than exports, resulting in a sizeable trade deficit in the first half of the year. While this can indicate expanding production activities, as enterprises ramp up imports of machinery and raw materials, it also highlights the domestic economy's heavy reliance on imported inputs. Inflationary pressures also warrant close monitoring. With both core inflation and the consumer price index (CPI) exceeding 4% in the first half of the year, the room for monetary policy maneuvering has tightened, demanding continued flexibility and caution in monetary governance. Giap emphasized that the key challenge is no longer how to achieve rapid growth, but how to sustain high-quality, long-term growth while maintaining macroeconomic stability. Chakraborty echoed this, stating that achieving strong growth over many years is essential for Vietnam to meet its goal of becoming a high-income country by 2045. To realize this ambition, the economy must decisively move away from a model reliant on capital, low-cost labor, and the FDI sector towards one driven by productivity, skills, innovation, and a stronger domestic private sector. Enhancing the capacity of Vietnamese private enterprises to absorb the benefits of foreign investment and participate more deeply in value chains is crucial. Furthermore, strong GDP growth must ultimately translate into higher incomes for the population and enable domestic businesses, particularly SMEs, to integrate into global supply chains. The ADB maintains a highly positive outlook for Vietnam's economy, projecting it to remain the fastest-growing in Southeast Asia. The bank also welcomed the Politburo's Resolution No. 10, which emphasizes linking domestic enterprises with global value chains, signaling Vietnam's determination to make the domestic private sector a key driver of economic growth. The focus for foreign investment should shift from attracting greater volumes to securing higher-quality investment and increasing the value added retained domestically. Source: VnExpress International