Vietnam’s Ambition For Double-Digit Growth: Rationale And Challenges – Analysis

By Ho Quoc Tuan

Since August 2024, when To Lam became the General Secretary of the Communist Party of Vietnam (CPV), the Vietnamese economic narrative has been characterised by an ambitious pursuit of high growth. This goal has been asserted by government leaders not merely as an economic aspiration but as a political imperative. Former Prime Minister Pham Minh Chinh described it as a “must-do” to meet the CPV’s strategic goal of transforming Vietnam into a developed, high-income economy by 2045. His successor, Le Minh Hung, reaffirmed that the double-digit growth target remains unchanged despite the challenges posed by the 2026 Iran War.[1] General Secretary To Lam has echoed this stance,[2] underscoring the administration’s steadfast commitment to this objective.

The government’s ambition for double-digit growth in the medium-term is significantly more optimistic than the cautious outlook of major international financial institutions (see Figure 1). While these organisations acknowledge Vietnam’s structural strengths, they warn that current global headwinds could weigh on growth.[3] Domestic financial institutions, by contrast, mirror the government’s optimism with more upbeat projections. For example, SSI Securities Corporation forecasts 2026 GDP growth at 8.8 per cent, and Dragon Capital puts it at 10 per cent.

Figure 1. Vietnam’s 2026 GDP Growth Forecasts by Domestic and International Institutions

The disparity between Hanoi’s political imperative for double-digit growth and the cautious forecasts of international institutions raises critical questions about the viability of the double-digit growth strategy, the key drivers that will propel this growth, and the associated risks.

In the following sections, this article explores the economic rationale for pursuing double-digit growth, outlines the strategies for achieving high growth, and examines the accompanying risks. It concludes by discussing the necessity for a robust risk management approach to ensure that the potential risks do not overshadow the benefits of this ambitious growth target.

RATIONALE AND POLICY DILEMMA

The Vietnamese government’s ambitious growth targets, including the push for higher average GDP expansion in the upcoming plan period, are strategically necessary to avoid the middle-income trap and the risk of “getting old before getting rich” within the next few decades. While Vietnam’s current robust economic growth, recorded at 8 per cent in 2025, benefits from a “golden population” structure, the rapid ageing of its population poses a significant long-term threat.[4] This risk is exacerbated by the potential for an “old but not healthy” ageing population, limiting the ability of the over-60 demographic to contribute economically through work or entrepreneurship, a crucial characteristic for high-income economies.

Giang Thanh Long from the National Economics University highlights a critical aspect of Vietnam’s demographic profile. Despite achieving parity in overall life expectancy with higher-income Southeast Asian countries like Thailand and Malaysia, Vietnam’s healthy life expectancy remains significantly lower. Giang suggests this trend illustrates a scenario of “living longer, but not necessarily better”.[5] As a result of lagging healthy life expectancy, despite high regional longevity rankings, Vietnam might face an increased healthcare burden in the future. Moreover, the social security network coverage remains insufficient, especially within the vast informal economic sector, where social insurance contribution rates often fall below 10 per cent.[6] Without accelerated growth to fund a robust and inclusive social safety net, this demographic shift could evolve into a substantial fiscal challenge.

Vietnam’s aim to attain high-income status by 2045 further drives its mandate for double-digit growth. Addressing Vietnamese enterprises on 27 March 2026, then-Prime Minister Pham Minh Chinh underscored the necessity for double-digit growth to meet the high-income target by 2045.[7]

Although this political commitment to rapid growth is strategically sound, it contradicts the need for macroeconomic stability. Vietnam’s previous high-growth cycles, often characterised by credit-fuelled expansion and asset bubbles, have left a lasting impact on economists and policymakers. The key challenge is mitigating the risks of overheating the economy and ensuring macroeconomic stability, creating a dilemma for policymakers who must balance growth with stability to achieve the “double mandate”.

This tension is highlighted by a recent warning from Nguyen Duc Hien, Deputy Head of the CPV Central Commission of Policy and Strategy, who stressed that growth cannot come at any cost; prioritising macroeconomic stability and economic resilience is crucial. “If inflation gets out of control, the price to pay will be much greater than the benefits of growth,” he cautioned.[8]

The State Bank of Vietnam (SBV) is also grappling with this tension in its exchange rate policy. It must maintain an accommodative monetary policy to support ambitious growth targets while safeguarding exchange rate stability, a macroeconomic priority that Vietnamese leaders have consistently emphasised,[9] and that new Prime Minister Le Minh Hung has since reaffirmed.[10] The contradiction between the imperative for accelerated economic growth and the emphasis on macroeconomic stability forms a central policy dilemma for Hanoi as it navigates an uncertain global environment towards a high-growth era.

THE RECIPE FOR DOUBLE-DIGIT GROWTH AND CHALLENGES FOR MACRO STABILITY

To achieve the ambitious 10 per cent GDP growth rate through 2030, the government needs to adopt an economic model that aggressively leverages domestic stimulus while managing inflation and asset prices. Dragon Capital, the largest independent fund manager in Vietnam with over 30 years of experience in the country, outlines the path forward for achieving this high-growth trajectory. According to their model (Figure 2), sustaining 10 per cent growth requires a combination of the following factors:

1. Strong credit expansion: Annual credit growth must be maintained in the range of 16-20 per cent.
2. Robust domestic consumption: Domestic consumption growth needs to accelerate to 11-12 per cent per year, up from the average growth rate of 8 per cent between 2021 and 2024.
3. Fiscal stimulus: The fiscal deficit should be managed between 4-5 per cent of GDP, supporting significant public spending, particularly on critical infrastructure projects.
4. External trade: Export growth must remain strong at over 12 per cent annually (up from the current 10 per cent growth) and contribute US$50 billion to the trade surplus by 2030.
5. Inflation control: Inflation must be contained within a band of 4.5-5 per cent.

Figure 2. Double Digit Growth – Vietnam’s Roadmap

These targets underscore substantial challenges but are not deemed unachievable, according to Mr Le Anh Tuan, CEO of Dragon Capital.[11] This optimism is grounded in the belief that Vietnam’s demographics, trade integration, and rising domestic demand can fundamentally support a new, higher growth trajectory, with accelerated consumption growth explicitly identified as a critical long-term growth pillar.

This growth recipe from Dragon Capital is consistent with the government’s approach. In early 2026, the government presented a single scenario, affirming its commitment to achieving a growth rate of 10 per cent or higher. The primary drivers of growth are the industry and construction sectors, expected to grow by 12 per cent or more, while the services sector is projected to expand by 11 per cent. Public investment plays a central role in driving these double-digit growth rates, with an increase of 10.4 per cent compared to the same period in 2025.[12] Public-private partnerships are also important, although there is an emphasis on state resources playing a “guiding role” in these partnerships.[13]

The contribution of export growth to Vietnam’s overall growth engine has come under scrutiny. While some analysts believe Vietnam is effectively leveraging its “connector economy”, benefiting from production diversification away from China, this also exposes the country to the risk of becoming a target for future US tariffs.[14] Although Vietnam is currently subject to US tariffs of 20 per cent, it could face tariffs exceeding 40 per cent if goods are identified as transshipments. Given concerns that the recent de-escalation in the trade war is merely a “pause, not peace”,[15] and the likely ongoing technological and geopolitical rivalry between the US and China, it is only a matter of time before Vietnam may be swept up in a new round of tariff uncertainty. Recognising this risk, Vietnam aims to diversify its export markets, targeting regions such as the Middle East, Latin America, and Africa.[16] However, this is easier said than done, as Vietnam is one of the countries most exposed to US trade dependence, while other emerging economies are also pursuing similar diversification strategies, vying for the few remaining large export markets.[17] Moreover, such diversification is more likely a risk management strategy and less likely to drive the expected stronger export growth. Consequently, Vietnam continues to rely on its “connector economy” strategy, exposing it to external shocks from US trade policies.

Domestic consumption is also showing signs of cooling. Although nominal retail sales grew by 9.5 per cent, inflation-adjusted spending rose by only 7.2 per cent. This slowdown is reflected in a sharp decline in consumer confidence, which hit its lowest point since the pandemic.[18] Households are shifting toward defensive financial behaviours, cutting discretionary spending in favour of increased savings and asset hoarding.

With both exports and consumption showing fragility, the 2026 growth model hinges heavily on public spending and private investment. However, achieving these targets requires a high credit impulse, estimated at 16–20 per cent, which places considerable strain on the 4.5-5 per cent inflation target, which is already challenging given the Iran War’s impacts. This creates a dilemma where the financing necessary to sustain growth directly conflicts with the government’s price stability mandates.

Historically, credit-fuelled expansions have often caused the economy to overheat and posed challenges to macroeconomic stability. During the 2007-2010 period, for example, bank lending surged to over 30 per cent annually, with a peak above 50 per cent in 2007. While this aggressive expansion provided short-term economic stimulus, it resulted in severe macroeconomic instability, with inflationary spikes exceeding 18 per cent in 2008 and 2011. At the same time, the quality of financial institutions’ assets deteriorated, with non-performing loans reaching over 8 per cent by 2012. These vulnerabilities prompted stability-focused measures, such as imposing credit growth ceilings and banking sector reforms, including the establishment of the Vietnam Asset Management Company in 2013 to address non-performing loans in the banking sector.

Memories of past unsustainable credit cycles have led the SBV to exercise caution regarding excessive credit growth, aiming for a 15 per cent credit growth target in 2026, down from 19 per cent in 2025. In a climate of volatile global supply chains, aggressive credit expansion could potentially trigger uncontrollable inflation. Moreover, excessive liquidity often leaks into speculative assets, raising the risk of reigniting real estate bubbles. Historically, this concentration of capital in property has threatened banking stability and necessitated costly state interventions.[19]

The government’s shift from a “growth at all costs” approach reflects a strategic understanding that a new asset bubble would undermine both the 2045 vision and the credibility of national economic management. Consequently, policymakers face a fundamental tension: the primary mechanisms required to achieve the double-digit growth target (high credit, high investment, high spending) are also the main factors that threaten the very macroeconomic stability emphasised by Vietnamese leaders.

CHALLENGES AHEAD AND A NEED FOR RISK MANAGEMENT STRATEGY

While the potential for double-digit economic growth remains within reach, the associated macroeconomic instability risks significant structural challenges. This necessitates transforming the high-growth model into a sustainable long-term plan with a sophisticated risk management strategy. This transformation faces three primary obstacles: the friction between monetary stability and high consumption-high investment growth, the limited spillover effect of export growth, and the systemic risks inherent in credit-led expansion.

As a result, the government, particularly the SBV, faces three critical structural challenges. First, there is a conflict between inflation targeting and domestic demand. To maintain inflation within the 4–4.5 per cent range and stabilise the Vietnam dong, the SBV must adopt a prudent policy stance, eventually leading to higher interest rates.[20] This approach has squeezed the private sector, particularly SMEs, leading to decade-low wage growth and stagnant disposable income.[21] This trade-off suggests that the cost of price stability could weaken the domestic consumer base.

Second, there is a disconnect between export success and the domestic economy. Although Vietnam posted a significant trade surplus in 2025, this was driven primarily by foreign-invested firms (+US$46.5 billion), masking a deficit in the domestic sector (-US$26 billion). Since these firms’ profits are often repatriated, the “multiplier effect” on local spending is muted. This explains why domestic consumption lags behind export growth, leaving the economy vulnerable to external shocks and volatility in foreign direct investment.

The final challenge stems from the risks associated with high credit growth. Given the fragility of consumer spending and the domestic export sector, the burden of growth shifts to private investment and public expenditure. Both components heavily rely on credit expansion, as bank credit remains the dominant funding source for the economy. Recent statistics indicate that over 82 per cent of the total capital for ambitious government infrastructure projects comes from non-state sources.[22] This situation creates a critical policy tension: the government must facilitate sufficient domestic credit growth to fund infrastructure without overheating the economy or inflating asset bubbles. Without careful calibration, this investment-led growth model risks destabilising the macroeconomic environment.

That said, this mission is not entirely impossible. While concerns about a recurrence of the 2007–2010 instability are valid, the current landscape differs significantly. First, the projected credit growth of 16–20 per cent is much more moderate than the hyper-expansion of the previous era, which saw rates exceeding 30 per cent. Second, the SBV has considerable experience in managing non-performing loans and retains the credit growth ceiling as an effective macroprudential backstop. Third, a significant portion of credit growth can be channelled into mega-infrastructure projects, which have the potential to boost long-term productivity. For example, in December 2025, the government held a nationwide ceremony for 234 projects across 34 provinces with invested capital nearing US$140 billion, in which 80 per cent came from non-government sources.[23]

However, the risk of capital misallocation remains a serious threat to macro stability. Despite regulatory efforts to limit cross-ownership between real estate developers and banks in Vietnam,[24] these relationships persist. The evolution of the financial sector, characterised by the rise of shadow banking, fintech intermediaries, and retail lending arms, provides new avenues for developers to circumvent regulations and channel credit into speculative real estate rather than productive assets.

Furthermore, without rigorous oversight, mega-infrastructure projects risk prioritising short-term disbursement targets over long-term economic benefits. If capital is diverted toward speculative assets or inefficient public works, the anticipated productivity gains will fail to materialise.

To mitigate these risks, credit growth must be strategically channelled towards projects with high economic multiplier effects, such as key transportation networks, energy security initiatives, and digital backbone infrastructure. Achieving this requires more than just capital; it necessitates the removal of bottlenecks in land clearance and regulatory procedures to ensure that capital rapidly translates into tangible assets.

Ultimately, a robust risk management strategy is essential to prevent the diversion of funds into inefficiencies. As the history of past economic turbulences involving entities like Vinashin and Van Thinh Phat demonstrates, systemic errors tend to recur if checks and balances within banks and the government are ignored. Although history may not repeat itself, it often rhymes, and it is the duty of policymakers to break that rhythm.

For endnotes, please refer to the original pdf document.

• About the author: Ho Quoc Tuan, is Senior Lecturer in Accounting and Finance at the University of Bristol Business School (United Kingdom) and former Visiting Senior Fellow at the Vietnam Studies Programme of the ISEAS – Yusof Ishak Institute.
• Source: This article was published by ISEAS – Yusof Ishak Institute.