Public investment may help Việt Nam achieve GDP growth target

A VinaCapital report highlighted the Government’s strong commitment to public investment disbursement this year.

A 40 per cent increase in infrastructure investment that Việt Nam’s Government is now planning would add approximately 2 percentage points to Việt Nam’s 2025 GDP growth - if the Government manages to hit its disbursement targets this year, according to Michael Kokalari, chief economist at VinaCapital.

In his latest report, he said the Government increased its 2025 infrastructure spending target from 6 per cent of GDP to 7 per cent of GDP last week and simultaneously lifted its GDP growth target for 2025 from 7 per cent to 8 per cent.

“The increased 1 per cent/GDP of planned spending on infrastructure projects should help the country achieve the Government’s new, 1 per cent higher 2025 GDP growth target and will also support the country’s long-term growth prospects and appeal to foreign investors.

“The Government’s newly approved plan to increase infrastructure investment by nearly 40 per cent this year to US$36 billion (up from the $31 billion originally approved late last year), should help offset the hit to the country’s GDP growth we expect from slower export growth to the US, following a 23 per cent surge in Việt Nam’s exports to the US last year.”

The report also highlighted the Government’s strong commitment to public investment disbursement this year.

Several large projects were initiated/approved over the last two months, including a $67 billion high-speed rail line that would span the length of the country and the $8 billion Lào Cai - Hà Nội - Hải Phòng railway.

Meanwhile, the first section of HCM City’s long awaited metro line opened in December 2024, which VinaCapital believes is helping to support enthusiasm and momentum for accelerated infrastructure development going forward.

Kokalari pointed out that the Government had ample fiscal resources to ramp up spending.

“Government debt is well below 40 per cent of GDP, and we estimate that the Government has over $40 billion of undisbursed funds previously earmarked for infrastructure spending.

“The primary bottlenecks to increasing infrastructure spending (or to achieving annual spending targets) have been bureaucratic issues impeding the project approvals and other processes entailed in large-scale project development,” he said.

Three major laws came into effect last month that are directly aimed at accelerating project approvals, streamlining investment disbursements, and driving greater private sector participation in infrastructure projects, and the laws should help expedite progress and ensure that spending targets are achieved.

Kokalari said more than 80 per cent of planned infrastructure spending this year would be earmarked for boosting the country’s electricity generation and distribution capacity, and for improving its transportation network. By 2030, Việt Nam aims to double the total length of its highway network, double airport passenger capacity and increase the country’s seaport capacity by 50 per cent.

The country’s Power Development Plan VIII, approved in 2023, anticipates 9 per cent annual electricity consumption growth for the foreseeable future. Việt Nam will need $135 billion to double Việt Nam’s electricity generation capacity over 2021-2030 with most of that growth expected to come from LNG (37 per cent of total planned capacity growth), renewables (27 per cent), and coal (19 per cent), according to Kokalari.

The report also highlighted that in early 2025, the Government announced additional public investments into large infrastructure projects related to railways and ports to further streamline freight movement, improve workforce mobility, and facilitate more FDI inflows into Việt Nam.

The Lào Cai - Hà Nội - Hải Phòng rail lines (and two other lines of Lạng Sơn – Hà Nội and Móng Cái – Hạ Long – Hải Phòng) would link nine provinces in Việt Nam to China’s Yunnan province, enabling a more efficient flow of goods across the two countries. This railway may also facilitate the transit of Vietnamese goods to Europe through China.

Regarding ports, the Government’s recent revision of its seaport development plan added the Cần Giờ port project, which would accommodate larger vessels, supporting the country’s goal of increasing its seaport capacity by 50 per cent by 2030, the report stated.