The country’s economy still has room to expand at a target of 6.8 percent in 2020, with exports set to continue rising, creating a trade surplus for the fifth year in a row, economist Nguyen Tri Hieu said.

Hieu’s comment followed Asian Development Bank (ADB) forecasting Vietnam’s GDP would expand by 6.8 percent in 2020, higher than the 5.5 percent Asia average.

Nguyen Minh Cuong, the bank’s chief country economist, said the forecast was based on rising trade value in Vietnam, which for the first time reached $517 billion in 2019.

The country is also seeing rising investment from international companies as they pull away from China amidst its trade war with the U.S., he said, adding the improving business environment in Vietnam has attracted these investors.

Foreign direct investment pledges in Vietnam reached a 10-year high value at $38 billion 2019, rising 7.2 percent year-on-year.

A recent study by professional services company PwC showed 44 percent of investors in Vietnam plan to increase their investment in the country in 2020, the highest rate globally, compared to 38 percent in Singapore and 36 percent in Thailand.

Vietnam also ranks second in the ratio of APEC investors eyeing to increase their cross-border investment, behind Australia, said the study, which polled over 1,000 business leaders from May to July 2019 from 21 Asia-Pacific Economic Cooperation (APEC) members.

49 percent of respondents were confident of revenue growth in 2020, higher than the APEC average of 34 percent, the study added.

Officials have expressed optimism for the country’s economic prospects in 2020. Prime Minister Nguyen Xuan Phuc said at a meeting Monday as the economy expands, there would be difficulties in achieving higher growth, though it’s not impossible.

Vietnam’s GDP managed to grow by 7.02 percent in 2019, the second highest rate in the last decade.

Phuc has ordered government bodies to raise the country’s exports by 13.8 percent from 2019 to $300 billion in 2020.

Challenges ahead

The first major challenge Vietnam will have to tackle in 2020 is a slowdown of the processing-manufacturing industry. While it has been a key sector dictating the economy's growth momentum in recent years, its growth rate had been declining towards the end of 2019.

The sector experienced a growth of 11.29 percent in 2019, the lowest in the past three years.

"The growth of the processing-manufacturing industry gradually declining in the last few months of the year shows difficulties coming up in 2020," said Nguyen Bich Lam, Director General of the General Statistics Office (GSO).

The second major challenge for Vietnam's economy in 2020 has to do with exports. Although a double digit surge was seen in exports to the U.S. in 2019, exports to other major markets such as the E.U., China and ASEAN saw almost no change and exports to Japan and South Korea only grew by around 8 percent.

In a report in early November, brokerage Saigon Securities Inc (SSI) Research raised the question of trade evasion. It noted that in the first 9 months of 2019, Vietnam's exports of goods to the U.S. increased sharply but this was accompanied by an increase in imports from China, while exports to the neighboring giant decreased.

The third challenge facing Vietnam's economy in 2020 would involve price management issues. Adverse fluctuations in the livestock sector, especially towards the end of 2019, have caused prices to soar. The Consumer Price Index (CPI) last December increased by 1.4 percent over the previous month, which was the highest increase in the past 9 years and was mainly due to supply shortages pushing up pork prices.

"This fluctuation is expected to continue having an effect in the first quarter of 2020 due to the upcoming Lunar New Year," said Do Thi Ngoc, Director of the GSO's Price Statistics Department. This issue, along with impending price increases for public services, will make the target of keeping the CPI below 4 percent next year "very difficult" to achieve, Ngoc said.

The capabilities of domestic enterprises, labor productivity and the competitiveness of the economy are other challenges that the nation is likely to face in 2020, making growth targets even more difficult to achieve.