A corner of Ho Chi Minh City (Photo: VNA)

Released on January 23 in London, the Asia House Annual Outlook 2024 examines how eight key economies in Asia will power ahead in 2024, delivering growth of circa 5% overall despite external global pressures including geopolitical tensions, conflict and a challenging inflation and interest rate environment. The report forecasts Vietnam and the Philippines will be the standout performers.

According to the report, in the first ten months of 2023, FDI in manufacturing projects was roughly 18 billion USD, or 73% of total FDI inflows registered in the same period. Additionally, foreign investors will increasingly turn to Vietnam to diversify their supply chains away from China.

Vietnam’s digital transformation programme aims to situate its domestic tech firms as global players. Vietnam has a thriving tech start-up environment and there has been significant public investment in AI. The National Innovation Centre supports tech breakthroughs in multiple sectors, while the banking sector is very active in AI testing and application. VPBank has applied Al in currency transactions, personal credit and digital banking, while Vietcombank has cooperated with FTP Smart Cloud to develop a customer chatbot platform, called VCB Digibot.

Vietnam is a leader in crypto-currency adoption and in blockchain projects. It is estimated to have more than 200 active blockchain projects and has been deploying blockchain technology for a number of functions, including for credit guarantees in trade and supply-chain finance.

Vietnam will continue to leverage blockchain technology to boost efficiency in the logistics industry with a particular focus on firms in Ho Chi Minh City.

The Make in Vietnam programme, in which homegrown businesses manufacture globally competitive products, will scale growth in multiple sectors. A strong labour market (69% of the population are of working age) will aid this growth.

In 2024, AI will reshape multiple sectors in Vietnam's economy and boost inward productive investment. By collaborating with educational institutions and actively participating in the development of AI infrastructure, inward investment can catalyse positive economic spill overs - both horizontally and vertically.

According to the report, as a major agricultural producer, Vietnam will benefit from inward investment in precision agriculture, AI monitoring and analysis to optimise yields and fertiliser use. AI can also be used to collect data on soil conditions, weather, crop growth and water usage, while sensors and drones can also provide key data. This can influence decisions on seed planting, fertilisation, pest management and other agronomic procedures.

The reports says that economic dynamism, resilient fundamentals and the openness of Vietnam's economy augur well for its green finance ecosystem. Regulatory incentives to encourage a shift to financing the green economy will be key in 2024 and beyond. The continued promotion and scaling of incentives to attract and channel green finance - with the engagement of domestic financial institutions - will spur Vietnam's energy transition and help build resilience against climate shocks.

The Bank for Investment and Development of Vietnam became the first bank to issue green bonds with the proceeds used to finance green, energy-saving, emission-reducing and environmental protection projects.

This was the first domestic green bond issuance in the Vietnamese capital market scored by Moody's. Additional efforts to scale green bond issuance will create pathways for more issuance and deliver more depth and breadth in the green ecosystem.

According to the report, Vietnam's blended green finance initiatives - such as the Asian Development Bank blended finance loan supporting wind energy (ADB, 2022b) - is particularly effective in supporting Vietnam's adaptation to climate risks and supporting renewable energy. As is the case in neighbouring South East Asian economies, climate finance mechanisms need to be calibrated to mitigate risk and to promote risk-sharing, particularly when channelling sustainable finance to Vietnam's smallholder farmers and SMEs.

With regard to Asian economies, the report forecasts in a world marked by geopolitical uncertainty, conflict and climate change, Asian economies will be the global growth engine in 2024, buoyed by regional trade and advances in digital technology and green finance.

The report, which includes detailed outlooks for China, India, Japan, Indonesia, Vietnam, Malaysia, Thailand and the Philippines, also points to multiple risks facing Asia, from possible disruptions caused by the number of elections in this “super-election” year, to escalating political tensions, volatile energy markets and restrictive monetary conditions.