Vietnam to become second-largest economy in Southeast

Over the past three decades, Vietnam has emerged as one of the fastest-growing economies in Asia, driven by consistent reforms and deep integration into global trade. According to the Centre for Economics and Business Research (CEBR), Vietnam is projected to become the second-largest economy in Southeast Asia by 2036, ranking only behind Indonesia.⁽¹⁾

The same report also forecasts that Vietnam could rise to become the 20th largest economy globally, a significant jump from its current position. Since the Đổi Mới reforms in the 1980s, the country has transformed from a low-income economy into a rapidly developing middle-income nation.

Strong export growth, manufacturing expansion, and global trade integration continue to drive this momentum, reinforcing expectations that Vietnam will reshape the region’s economic landscape in the coming decade.

Long-term economic growth since the reforms 

The long-term trajectory of Vietnam highlights one of the most notable economic transformations in Asia. This progress began with the Đổi Mới reforms introduced in the mid-1980s, which shifted the country from a centrally planned system toward a more market-oriented economy.

These reforms created the foundation for sustained economic growth. They enabled the expansion of the private sector, encouraged foreign direct investment, and positioned Vietnam as a competitive player in global trade.

As a result, export-led growth became a central pillar of the economy, particularly in manufacturing sectors such as electronics, textiles, and machinery.

According to the Centre for Economics and Business Research, Vietnam’s growth story has been described as “nothing short of a miracle.” Over the past decades, the country has successfully transitioned from a low-income economy to a lower-middle-income nation, with rising income levels and improving living standards.

This consistent growth momentum is also reflected in Vietnam’s global economic standing. Forecasts suggest that the country’s ranking could rise from around 41st globally to approximately 20th by 2036. Such progress underscores the effectiveness of long-term policy direction and economic integration.

Ultimately, sustained expansion, combined with structural reforms and global trade participation, is a key reason analysts expect Vietnam to become the second-largest economy in Southeast Asia.

Rising GDP and global economic ranking 

The rapid expansion of Vietnam continues to position the country as one of the most dynamic emerging markets globally. According to the World Economic League Table published by the Centre for Economics and Business Research, Vietnam’s economic trajectory is expected to accelerate significantly over the next decade.

Forecasts indicate that Vietnam could become the second-largest economy in Southeast Asia by 2036, ranking just behind Indonesia. At the same time, its global economic ranking is projected to rise to around 20th place worldwide, reflecting sustained high growth compared with many peer economies.

This upward trend builds on a strong foundation. In 2021, Vietnam’s GDP per capita (PPP) reached approximately USD 11,608, marking a substantial improvement in income levels and economic productivity. Since then, continued industrialization, export expansion, and foreign investment inflows have supported further GDP growth.

More recent projections clearly demonstrate the scale of Vietnam’s economic expansion. By 2035, the country’s GDP is projected to approach USD 994 billion, reflecting sustained and robust growth. With an average annual growth rate of around 5%, Vietnam is set to steadily rise in global economic rankings. ⁽²⁾

Notably, the report suggests that Vietnam may eventually surpass several developed economies in total economic output, including Belgium, Switzerland, Sweden, and even Australia.

These projections reinforce a clear long-term outlook: sustained GDP growth and structural transformation are key factors supporting expectations that Vietnam will become the second-largest economy in Southeast Asia.

Trade integration and export-driven growth 

Vietnam has established itself as a leading manufacturing and export hub in Asia, making trade integration a central driver of its economic expansion. Over the past two decades, the country has become deeply embedded in global supply chains, particularly as multinational companies diversify production beyond traditional manufacturing centers.

Key export sectors play a crucial role in sustaining growth, including:

• Electronics and components.
• Machinery and industrial equipment.
• Textiles and garments.
• Footwear.

These industries have enabled Vietnam to maintain a strong export performance, with manufacturing acting as a backbone of the economy. The country’s competitive labor costs, improving infrastructure, and strategic location further enhance its attractiveness as a production base.

Vietnam is also among the most trade-dependent economies in Asia, with total trade value accounting for a significant share of its GDP. This high level of openness allows the country to benefit directly from global demand and international market access.

Importantly, participation in major trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership has accelerated Vietnam’s integration into the global economy. These agreements help reduce trade barriers, improve market access, and attract foreign investment.

As global firms continue to optimize supply chains, Vietnam’s role in international trade is expected to expand further. This sustained export-driven growth remains a key factor supporting its long-term trajectory and strengthens the outlook for Vietnam to become the second-largest economy in Southeast Asia.

Path toward high-income status by 2045 

Vietnam has set an ambitious long-term vision to become a high-income country by 2045, marking a major milestone in its economic development journey. This goal reflects not only strong growth momentum but also a strategic shift toward a more advanced and sustainable economic model.

To achieve this target, Vietnam is expected to maintain an average annual per capita GDP growth of around 5% over the next two decades. Sustaining this pace will require consistent policy execution and structural transformation across key sectors.

The government’s development strategy focuses on several core priorities:

• Upgrading industrial capacity to move beyond labor-intensive manufacturing toward high-value production
• Strengthening innovation and technology sectors, including the digital economy, artificial intelligence, and green technologies
• Improving productivity through workforce upskilling, education reform, and infrastructure development

In parallel, Vietnam is accelerating its transition toward a knowledge-based economy. This includes expanding digitalization, promoting sustainable growth models, and enhancing institutional quality to support private sector development.

According to global development institutions such as the World Bank, achieving high-income status will also depend on improving governance, increasing labor efficiency, and integrating climate resilience into economic planning.

Ultimately, this structural transformation is essential for maintaining long-term growth and avoiding the middle-income trap. If successfully implemented, these strategies will not only elevate Vietnam’s global economic standing but also reinforce its trajectory toward becoming the second-largest economy in Southeast Asia.

Key challenges Vietnam must overcome 

Despite its strong growth trajectory, Vietnam faces several structural challenges that could affect its long-term development path and its ambition to become the second-largest economy in Southeast Asia.

Global trade uncertainty

Vietnam’s export-driven model makes the economy highly sensitive to fluctuations in global demand. Slowdowns in key markets, rising protectionism, or new trade barriers can directly impact exports, which have grown at an average of around 12% annually since 2000.

As global trade becomes more volatile, maintaining stable growth will require greater diversification of markets and products.

Demographic transition and aging population

Vietnam’s demographic advantage is gradually diminishing. Lower fertility rates and rapid urbanization are reducing the supply of young workers, while the population is aging.

This shift is expected to end the “demographic dividend” around 2036, leading to a tighter labor market, rising wage pressures, and increased social costs. Future productivity gains will need to come from skills and innovation rather than labor expansion.

Technological disruption and productivity gaps

Automation and digital transformation pose both opportunities and risks. Labor-intensive sectors such as textiles and basic manufacturing may face disruption from robotics and artificial intelligence.

At the same time, weak technological linkages between foreign-invested enterprises and domestic firms limit knowledge transfer and productivity growth. Strengthening innovation capacity and upgrading local industries are therefore critical priorities.

External balance and foreign exchange constraints

Vietnam also faces structural challenges related to foreign exchange. Its export model is import-intensive, with a significant share of inputs sourced from abroad. In addition, capital outflows and profit remittances from foreign investors can create pressure on the balance of payments, requiring careful macroeconomic management.

Climate change risks

As one of the countries most vulnerable to climate change, Vietnam faces rising risks from sea-level rise, extreme weather, and environmental degradation. These factors could disrupt agriculture, infrastructure, and coastal economic zones.

Overall, the Centre for Economics and Business Research emphasizes that addressing these challenges will require stronger policy implementation, institutional reform, and a strategic shift toward innovation-led growth. Successfully navigating these risks will be essential for sustaining long-term economic expansion.

Outlook for Vietnam’s role in Southeast Asia 

The future economic landscape of Southeast Asia is expected to undergo significant shifts, with Indonesia likely maintaining its position as the region’s largest economy. However, Vietnam is projected to rise rapidly and become the second-largest economy in the region by 2036.

This transformation could reshape economic dynamics across the Association of Southeast Asian Nations, as Vietnam strengthens its role in regional supply chains and trade networks.

With a strong foundation in export-oriented manufacturing, the country continues to attract multinational corporations seeking to diversify production and optimize costs.

Vietnam’s ongoing industrialization, combined with deepening trade integration and consistent foreign investment inflows, will be key drivers of this shift. The country’s participation in major trade agreements and its strategic location further enhance its position as a regional economic hub.

In addition, Vietnam is gradually moving up the value chain by investing in technology, infrastructure, and human capital. This transition will support more sustainable and higher-quality growth, allowing the economy to remain competitive in an increasingly digital and innovation-driven global environment.

If current trends continue, Vietnam could become one of the most influential economic powers in Southeast Asia, not only in terms of GDP size but also in trade, manufacturing, and regional connectivity.

Overall, the outlook that Vietnam will become the second-largest economy in Southeast Asia is increasingly realistic. For updated insights on doing business in Vietnam, visit BBCIncorp’s website or contact service@bbcincorp.com.

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References: 

(1) https://en.vietnamplus.vn/vietnam-to-become-second-largest-economy-in-southeast-asia-by-2036-cebr-post318471.vnp

(2) https://vietnamnet.vn/en/vietnam-races-ahead-in-gdp-growth-closing-gap-with-southeast-asia-s-giants-2479577.html

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