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Red Flags in Vietnam Economy Raise Investor Caution, Warns Radio Free Asia

Vietnam has seen significant growth in recent years due to its successful handling of the Covid-19 pandemic and a rise in corporate supply chain diversification out of China. In 2022, Vietnam experienced an 8.5% growth and received $22.4 billion in foreign direct investment, with another $20 billion pledged by September 2023. Despite this, early 2023 saw a 3.72% growth, far below the target of 6.5%.

The country is heavily reliant on exports, reaching 93% of its GDP in 2021, and has experienced a significant decrease in exports in recent months. The arrival of foreign investors, such as Intel and Ørsted, was expected to boost the economy; however, both companies have announced withdrawals from investments in Vietnam.

Several systemic issues contribute to Vietnam’s economic challenges, including unreliable electricity supply, human capital shortages, corruption, political instability, and slow policy-making. These factors have affected foreign investors’ confidence in the country’s leadership.

Zachary Abuza is a professor at the National War College in Washington. The views expressed here are his own and do not reflect the position of the U.S. Department of Defense, the National War College, Georgetown University, or Radio Free Asia.


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