Economic growth of approximately 2.5-2.6% amid numerous challenges

According to Dr Can Van Luc, Chief Economist at BIDV, there are currently eight emerging trends in the global economy. These include uneven global economic recovery with rising risks (both economic and geopolitical); a shift towards greener lifestyles; unprecedented changes in monetary and fiscal policies, with many unconventional measures employed in recent times; the pandemic acting as a catalyst for faster digital transformation; strategic competition and trade protectionism; and increasingly severe climate change.

The economic growth rate globally and in Vietnam has slowed down in this decade, with growth hovering around 2.5-2.6%, lower than the rate of 3.3-3.5% recorded in the previous period.

Nguyen Anh Tuan, Vice Chairman of the Vietnam Association of Foreign-Invested Enterprises (VAFIE), noted that the current economic landscape is marked by unprecedented challenges. These arise from intense geopolitical and economic shifts worldwide, climate change risks, urgent demands for green and digital transformation due to internal weaknesses and policy and regulatory inadequacies.

Across the globe, wars are ongoing in the heart of Europe and the Middle East, with localised conflicts in other regions. At present, global economic growth forecasts remain bleak, with warnings for a potential global financial crisis and an imminent “stock market bubble burst” in the near future.

Tuan said: "This warning stems from recent movements in the international financial market. For instance, Warren Buffett’s large-scale sale of shares worth up to 75.5 billion USD along with the Federal Reserve and many other central banks reducing interest rates, while Japan, in contrast, has raised rates to restore the yen’s value amidst new US economic instabilities. The old global economic order is shifting, and leaders from some nations have proposed scenarios for a new world economic order at official forums."

Domestically, exports and foreign direct investment (FDI) continue to grow rapidly. However, more than 70% of export turnover still comes from the FDI sector, and the connections remain weak between FDI enterprises and domestic firms, as well as between Vietnam's large corporations and small- and medium-sized enterprises (SMEs).

Given this context, Tuan expressed his belief that if legal obstacles and regulatory barriers are not promptly resolved, businesses could be “stuck” amidst new opportunities and challenges.

Automatic welding line at THACO Truong Hai. (Photo: Nam Hai)

Key solutions?

In light of the current context, Dr Nguyen Dinh Cung said that businesses need only the government's companionship, assistance, and support. With policy and legal authority in its hands, the government can help address market challenges.

So, which policies should take priority? Dr Can Van Luc recommended that in addition to capital mobilisation (according to the World Bank, Vietnam needs USD 368 billion from 2022-2040, equivalent to 6.8% of GDP annually, to develop a green economy and aim for net-zero emissions by 2050), the government should refine policy frameworks and introduce sandbox mechanisms to support the development of the digital economy, green economy, circular economy, and new business models. It is also essential to enhance the financial market, specifically focusing on corporate bonds, stock markets, investment funds, and venture capital.

Moreover, breakthrough policies are needed for human resource development and science-technology innovation in this new context, with a special emphasis on AI, cybersecurity, and choosing suitable semiconductor industry development models.

Meanwhile, Dr Vo Tri Thanh, Director of the Institute for Brand and Competitive Strategy Research, also agreed on prioritising policies for the green economy, digital economy, and AI development. He added that Vietnamese enterprises need to proactively seek opportunities, accept competition, and connect with skilled partners for learning and sharing. They should keep pace with the Fourth Industrial Revolution, engage in dialogues, and ensure compliance with law (to safeguard business contracts and rights).

Le Hong Viet, CEO of FPT Smart Cloud — a leading tech firm, noted that according to a recent report by Google and Bain Co., Vietnam's digital economy is the fastest-growing in Southeast Asia. The significant increase in scale and transaction volume has created a massive amount of data, necessitating flexible data storage and processing platforms, along with robust tools for data extraction. AI stands out as a top solution to tackle this challenge.

Citing IBM’s report this year, which reveals that AI has helped 35% of companies increase revenue by at least 5%, with some reaching up to 20%, Viet said: "Vietnamese businesses can break out of their comfort zones and explore new business areas through AI applications. AI enhances productivity, speeds up decision-making, and improves customer experiences. This allows Vietnamese companies to make significant productivity leaps to escape the middle-income trap. Large-scale computational models for developing AI algorithms require supercomputers and advanced data infrastructure."

To develop AI, investment in research and semiconductor autonomy has become a “hot issue” among nations. “The global semiconductor market is projected to grow by double digits in the coming years, reaching 1 trillion USD by 2030. Vietnam is currently drafting the Semiconductor Industry Development Strategy until 2030, with a vision to 2035. This strategy will outline Vietnam’s vision, determination, objectives, timeline, action tasks, and special incentives to foster the growth of the electronics industry in general and the semiconductor sector in particular,” said Viet.

Do Tien Thinh, Deputy Director of the National Innovation Centre (NIC), pointed out that Vietnam has a unique advantage in harnessing AI’s tremendous benefits. These advantages include a young and tech-savvy population, with 70% of citizens under the age of 35; the second-fastest growing internet economy in Southeast Asia, with the total value of goods projected to grow at 29% annually until 2025; and supportive policies to promote digital technology development, such as the 4.0 Industrial Revolution and AI strategy.

However, Thinh cautioned that AI also poses challenges for the economy and businesses, such as the elimination or significant reduction of various industries and jobs; AI replacing numerous roles, including programmers, teachers, actors, marketers, engineers, and call centre operators; and the fierce competition depending on the extent of AI integration in products and services.

Therefore, it is essential to identify processes where AI can boost competitiveness and reduce costs, promote AI-based startups, spread AI benefits, and encourage AI adoption across businesses, the public, and the public sector.