Can Vietnam Sustain Double-Digit Growth?

Vietnam has long thrived under a growth model fueled by exports and foreign direct investment. This approach has propelled the nation to upper-middle income status. However, as the country advances, this model is encountering new challenges. Diminishing returns on capital accumulation, slower labor force growth, and more efficient utilization of human capital all loom on the horizon. Additionally, the external environment appears less favorable.

Despite these hurdles, projections indicate that Vietnam still holds solid medium-term growth potential. The key seems to be a sharper focus on productivity. As traditional growth drivers lose their potency, the role of productivity is expected to grow.

Achieving the government's goal of double-digit growth over the medium term would necessitate a significant boost in investment and productivity compared to past benchmarks. Relying on credit or fiscal expansion to sustain economic activity beyond the economy's productive limits could introduce macro-financial risks.

Thus, continuous advancement towards higher-income status will depend on maintaining macroeconomic stability. This will require enhancing investment efficiency, bolstering human capital and domestic capabilities, accelerating technology diffusion, and tackling infrastructure shortcomings.