DECEMBER REPORT - GDP 2024 Growth Beats Official Target, Transforming Energy Policy, and Advancing Data Regulation

As Vietnam enters 2025, the nation stands at a pivotal economic juncture, characterized by robust growth, strategic policy initiatives, and emerging opportunities across multiple sectors. With a remarkable GDP growth of 7.09% in 2024 exceeding national targets, Vietnam demonstrates remarkable economic resilience and strategic positioning in the ASEAN region. This report explores the key economic indicators, government policies, and transformative developments shaping Vietnam's economic trajectory.

I. Business News:

1. Market Outlook

• Vietnam's GDP Growth in 2024 Exceeds Official Goals

Vietnam's GDP grew 7.55% in Q4 2024, accelerating from Q3's 7.43% and marking the 13th consecutive quarter of growth. Full-year 2024 GDP reached 7.09%, exceeding the National Assembly's 6-6.5% target and 2023's 5.05% growth.

Key highlights:

• Final consumption rose 7.54%

• Fixed investment increased 7.98%

• Exports jumped 11.35%

• Services activity quickened to 8.21%

• Agricultural output grew 2.99%

Industrial output and construction saw slightly slower growth compared to Q3.

Looking ahead, Vietnam targets 6.5-7.0% GDP growth in 2025, with plans to pursue annual growth rates over 10% from 2026-2030.

• HSBC: FDI Remains Vietnam's Key Strength 

According to Tim Evans, CEO of HSBC Vietnam, Vietnam's economy achieved a GDP growth of 7.09% in 2024 with numerous notable highlights. FDI continues to be a strength with implemented capital reaching $25.35 billion, up 9.4% year-on-year, marking the third consecutive year exceeding $20 billion. For the coming year, Vietnam is forecast to maintain its superior position in ASEAN and Asia with projected GDP growth of 6.5% and inflation around 3%. New growth drivers include the transition to a Net Zero economy (requiring $400 billion by 2040) and the digital economy. Vietnam possesses multiple competitive advantages including low costs, open trade policies, high-quality workforce (ranking second in regional PISA scores), and effective inflation control, establishing a solid foundation for the next development phase.

2. Vietnam Key Indicators

• Manufacturing Sector in Vietnam Slides Back into Contraction

Vietnam Manufacturing's PMI fell to 49.8 in December 2024, indicating a slight deterioration in business conditions after three months of growth. Output and new orders increased slightly, while new export orders declined. Employment contracted for the third time, and backlogs of work rose. Delivery times lengthened, and inflationary pressures intensified. Business confidence dropped to a 19-month low.

• Inflation in Vietnam Hits a 4-Month High

Vietnam's annual inflation rate reached 2.94% in December 2024, the highest since August. Prices accelerated for housing, beverages, clothing, home appliances, health services, and culture. Deflation slowed for transport, while food and beverage services and other goods and services eased. The core inflation rate rose to a ten-month high of 2.85%. Monthly consumer prices increased to 0.29%.

• Vietnam FDI Up 7.1% from January to November

Foreign direct investment (FDI) into Vietnam increased by 7.1% YoY to $21.68 billion from January to November 2024, with processing and manufacturing leading the sector & Real estate followed. Singapore and South Korea being the largest investors. FDI pledges also rose by 1% YoY to $31.38 billion.

VN Foreign Direct Investment - Dec, 2024

3. Government Direction & Public Infrastructure

• Vietnam Extends VAT Reduction Until Mid-2024 

The Vietnamese government has extended the 2% VAT reduction until June 30th through Decree 180. This applies to goods and services originally subject to 10% VAT, excluding real estate, securities, banking, telecommunications, IT, coal, chemicals, and special consumption goods. The reduction affects all stages of business from import to retail. The policy is expected to reduce state budget revenue by 25,000 billion VND but aims to stimulate consumption and support economic recovery. This continues the VAT reduction policy implemented since 2022, which has provided 123,800 billion VND in support over three years.

• Vietnam Promotes Waste-to-Energy and Floating Solar Power | Việt Nam Thúc Đẩy Phát Triển Điện Rác và Điện Mặt Trời Nổi

The Ministry of Industry and Trade is actively promoting waste-to-energy plants and floating solar power projects within the Power Development Plan VIII adjustment. Currently, 34 waste-to-energy projects with a total capacity of 621.1MW are being proposed. Floating solar projects, especially on hydroelectric reservoir surfaces, will be prioritized in the planning. Vietnam has several operational waste-to-energy plants, with the largest being Soc Son plant processing 4,000 tons of waste daily. The Ministry is also considering expanding rooftop solar applications following Decree 135. The Power Development Plan VIII adjustment is expected to be approved before February 28, 2025.

• How Will Can Gio and Cu Chi Transform With New Metro Lines?

HCMC plans to add 2 metro lines connecting to Cu Chi and Can Gio districts, in addition to the 10 existing lines planned for the central area. This is a strategic move to develop the two districts with the lowest population density. Both districts have abundant land but limited transportation connectivity. The metro lines will be important development catalysts, helping attract investment and reduce pressure on the inner city.

The Cu Chi metro line is planned along the Saigon River, creating opportunities for Transit-Oriented Development (TOD) and riverside real estate. Cu Chi is oriented to become an industrial center. Meanwhile, the Can Gio line has attracted interest from Vingroup with their coastal urban project, but TOD development is limited due to Can Gio's designation as the city's "green lung." Both projects are part of the plan to upgrade suburban districts into satellite cities within the next 5 years.

4. Potential Industries

• Semiconductor and AI 'Eagles' May Receive 50% Support for Initial Investment Costs 

The government has just issued Decree 182 regarding the establishment of an Investment Support Fund for enterprises in semiconductor and AI sectors, effective from December 31, 2024. According to the decree, businesses can receive up to 50% support for initial investment costs, provided they have no tax or budget debts, and their projects must positively impact the innovation ecosystem. Projects must be in the priority high-tech category, with a minimum investment capital of 3,000 billion VND and disburse at least 1,000 billion VND within three years. Additionally, other high-tech enterprises will receive support for workforce training, research and development, fixed asset investment, and social infrastructure investment. This policy was introduced to address the situation where many large corporations have shifted their investments to other countries due to Vietnam's lack of specific regulations and investment incentives that are not yet compatible with the global minimum tax context.

II. Legal Updates:

• Game Changer: The New Law on Electricity 

The new Law on Electricity no. 61/2024/QH15 will take effect on 01 February 2025. We summarize the important points and changes that might impact businesses in Vietnam. 

Key Highlights and Changes:

1. Enhanced Renewable Energy Development:

Strengthens incentives for renewable energy projects, such as solar, wind, and biomass, including preferential corporate tax rates and land-use incentives.

2. Decentralization of Power Generation:

Promotes self-generation systems (e.g., rooftop solar) for businesses and households, allowing them to sell surplus power to the grid under updated pricing schemes.

3. Electricity Market Reforms:

Accelerates the transition to a competitive electricity market, particularly at the wholesale and retail levels, with transparent mechanisms to ensure fair competition.

4. Smart Grid Technology and Digitalization:

Introduces requirements for modernizing the national grid with smart technology to enhance energy management, efficiency, and system stability.

5. Environmental Compliance and Sustainability:

Tightens environmental regulations for fossil fuel-based power plants and integrates Vietnam’s carbon neutrality goals into the energy sector’s planning.

Impact on Businesses:

1. Renewable Energy Developers: Encouraged to expand their projects due to enhanced incentives and streamlined procedures.

2. Manufacturers and Large Energy Consumers: Opportunities to reduce electricity costs through rooftop solar and energy efficiency solutions but must meet stricter environmental compliance.

3. Foreign Investors: Gain a clearer and more competitive framework for entering the electricity market, especially in clean energy.

4. Energy Suppliers: Must adapt to digitalization and transparency requirements to compete effectively in the liberalized market.

• The Second Version of Draft Decree on Vietnam Law on Data is Now Open for Public’s Comments

As Vietnam Law on Data will enter into force on 01 July 2025, the Ministry of Public Security (MPS) is preparing a Draft Decree to obtain Government’s approval. We summarize some new key highlights as following: 

1. Definition of Critical and Core Data

The draft decree defines two categories of sensitive data: critical data and core data. Critical data includes information that impacts national defense, security, macroeconomic stability, and public health or safety. Examples include data related to national infrastructure and economic lifelines. Core data encompasses information with direct relevance to national governance, such as confidential state projects, national defense strategies, and critical national resources. These categories are subject to stringent protections, requiring risk assessments, secure handling, and restricted sharing practices to safeguard national interests.

2. Cross-Border Data Transfers

The decree establishes strict rules for transferring data abroad, especially critical and core data. Organizations must conduct impact assessments to evaluate risks related to data security, national interests, and compliance with Vietnamese laws. Agreements with foreign data recipients must clearly outline obligations such as data protection measures, retention periods, and incident response protocols. Routine risk assessments are mandatory every six months for critical data and annually for core data. Non-compliance with these requirements can result in significant penalties.

3. National Data Management Framework

The decree introduces a unified framework for managing data at both national and local levels. It mandates that data controllers adopt standardized processes for data collection, storage, sharing, and quality assurance. This framework is aimed at improving the interoperability and security of data systems across government agencies and private organizations. The National Data Center will oversee compliance and coordinate data sharing between entities to ensure seamless governance.

4. Data Protection and Encryption

The decree prioritizes data security by mandating the encryption of sensitive data during storage, transmission, and processing. Organizations must implement robust access controls, continuous monitoring, and disaster recovery mechanisms to mitigate risks of data breaches or unauthorized access. Encryption methods must adhere to standards specified by the Ministry of Public Security to ensure consistency and reliability across sectors.

5. Biometric and Personal Data Protection

The decree emphasizes the protection of biometric and personal data, aligning with international standards for privacy and security. Unauthorized access, use, or sharing of such data is strictly prohibited. Organizations handling biometric or personal data are required to obtain explicit consent from data subjects and ensure that such data is securely stored and processed. Violations may result in administrative or criminal penalties, depending on the severity of the breach.

6. Transparency and Consent Mechanisms

To enhance transparency, the decree requires organizations to obtain clear and informed consent from individuals before collecting or processing their data. Tools must be provided to allow individuals to withdraw or modify their consent easily. Exceptions apply when data processing is necessary for public interest or national security purposes. Organizations must also notify data owners of any breaches or unauthorized access affecting their data.

7. Risk Management and Incident Response

Organizations managing critical or core data are obligated to develop comprehensive risk management frameworks and incident response plans. These include regular risk assessments, staff training programs, and emergency drills to prepare for potential data breaches or cyberattacks. Incident response plans must be submitted to the relevant authorities and include procedures for containing and mitigating damages, restoring services, and notifying affected parties.

Vietnam's economic strategy for 2024-2025 reflects a comprehensive approach to sustainable development, focusing on critical areas such as renewable energy, digital transformation, and high-tech investments. By leveraging strengths in foreign direct investment, implementing progressive policies in sectors like semiconductors and AI, and prioritizing infrastructure development, Vietnam is strategically positioning itself for accelerated growth. The nation's commitment to competitive market reforms, technological innovation, and data governance signals a forward-looking economic model that balances national interests with global competitiveness.

Reference Sources:

• https://tradingkinh tế.com/vietnam/gdp-growth-annual

• https://tradingkinh tế.com/vietnam/manufacturing-pmi

• https://tradingkinh tế.com/vietnam/inflation-cpi

• https://tradingkinh tế.com/vietnam/foreign-direct-investment

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