Stimulating demand and promoting domestic consumption is identified as one of the three key driving forces to boost Vietnam’s economic growth in 2025.
Vietnam’s economic growth target this year is over 8%. According to the method of calculating GDP based on total expenditure, the formula is applied: GDP = C + I + G + (X – M), in which: X – M (net exports) is affected by external factors such as exchange rates, international interest rates and global economic fluctuations; G (government spending) includes investment in public goods and services such as education, health care, and defense. In particular,
public investment is expected to play a key role in promoting growth. C + I (personal and household consumption and private investment) are two important components in the economy.
According to Mr. Nguyen Minh Tuan, founder of the Vietnam Financial Advisory Community, the GDP growth target of over 8% this year is a big challenge but also a pivotal point for the double-digit growth period in the future. To achieve this goal, it is necessary to focus on core factors: labor, capital and productivity.
“According to analysis, to achieve 8% GDP, domestic consumption needs to increase by about 12%, higher than the average of 8% in the past 5-10 years. Therefore, stimulating domestic consumption becomes the top priority, through tax reduction policies, interest rate support and promoting spending incentive programs,” said Mr. Tuan.
In recent years, especially after COVID-19, domestic consumption has faced many difficulties due to low income growth. Production and business activities have slowed down, many businesses have left the market, creating pressure on people’s jobs and incomes. Although GDP in 2024 reached more than 7%, there is a large gap between the FDI sector and domestic enterprises. The private economic sector, especially individual businesses, have faced many challenges, leading to limited domestic purchasing power.
Besides, in the volatile international context, cautious psychology makes both businesses and people prioritize saving and limit spending, making total demand in the economy unable to increase as strongly as expected.
Domestic consumption demand is forecast to continue to grow as people’s sentiment gradually recovers, the economy maintains high growth momentum and goods become more competitive, helping consumers buy more goods with the same amount of money. This is also an important solution to stimulate consumption.
Since the beginning of this year, the Government has continued to reduce the value-added tax (VAT) rate by 2% for a number of groups of goods and services until June 30, except for sectors such as telecommunications, information technology, finance – banking, insurance, real estate, metals, mining (except coal), oil, chemicals and products subject to special consumption tax. Recently, the Government also assigned the Ministry of Finance to study and propose expanding the subjects of VAT reduction for the last six months of this year and 2026.
“Reducing VAT is directly effective in encouraging people to consume. However, the application period should be extended instead of just stopping in the first half of the year, and at the same time, consider adjusting personal income tax policies (such as family deductions) to support people with low and medium incomes, especially in large cities,” Mr. Tuan proposed.
Tourism is a bright spot in the economic picture at the beginning of the year. Total revenue from tourists in the first two months of the year reached about 160 trillion VND, with international visitors alone increasing sharply, reaching nearly 4 million (up more than 30% over the same period). International visitors to Vietnam can be seen as a form of “on-site export”, bringing in foreign currency and creating jobs for the people. However, there are still some barriers that prevent the number of international visitors from reaching optimal levels.
“Vietnam’s tourism industry has set a target of welcoming more than 20 million visitors this year, and to achieve that, it is necessary to remove some obstacles, especially regarding visa policies. Simplifying entry procedures, extending the length of stay and expanding the list of visa-exempt countries will help Vietnam become a more attractive destination,” Mr. Tuan shared.
Domestic tourism reached 26.5 million visitors in the first two months of this year, but the number could still rise. Domestic travel costs, especially transportation costs such as airfare, make many people feel that traveling abroad is cheaper.
“Currently, local promotional policies and strategies to attract visitors are not really consistent. Many beautiful destinations like Phu Quoc do not have attractive policies to attract visitors to return regularly. Especially during peak season, some tourist destinations are overloaded, causing high-income people to choose to travel abroad instead of domestically,” Mr. Tuan assessed.
To boost spending and consumption, people need to have higher incomes or feel financially well-off, and money must generate better returns when they borrow to consume. Credit institutions have also researched and developed credit products and banking services specifically for the consumer sector with lower interest rates and increased lending for living needs.
According to Mr. Tuan, banks, financial companies and Fintech applications are stepping up to provide convenient loan services to people. However, there are two important factors to note.
Firstly, in the current context, consumer interest rates are quite high because these loans are often unsecured and have quick procedures. Therefore, maintaining a reasonable interest rate level, helping people not consider consumer loans a burden, will be a key factor to promote credit growth in this field.
Second, credit limits for financial companies and banks need to be strictly managed, because the bad debt ratio in this sector is quite high , from 10 – 15% for debt groups 3, 4, 5. Therefore, a reasonable interest rate policy combined with effective credit management will be a necessary solution to both promote spending and ensure the stability of the financial system.
“In addition to policies to support interest rates, credit and fee reduction, it is important to have an effective enforcement mechanism to ensure smooth implementation. Consumer credit should be promoted within a suitable risk management framework. Management agencies can consider adjusting the risk coefficient for consumer loans, helping to balance credit expansion and bad debt control. In addition, it is necessary to orient capital flows reasonably, reduce credit to areas that are less useful for production and business, such as speculative real estate, and switch to supporting consumption,” Mr. Tuan analyzed.
Stimulating demand and promoting domestic consumption is identified as one of the three key drivers to promote economic growth. Policies such as reducing taxes and fees, deferring debt, and improving transparency and infrastructure will help strengthen market and people’s confidence. When confidence is built, individuals, households and businesses will boldly invest and expand production and business. Only then can the economy maintain sustainable growth momentum, achieve the target of domestic consumption increasing by over 12% and make an important contribution to the GDP target of over 8% this year, helping Vietnam overcome challenges and develop strongly.