Unleashing Public Investment to Spur 2025 Growth

8 February, 2025

The operation of Ho Chi Minh City’s Metro Line 1 by late 2024 marks a significant step forward in infrastructure development. Photo: Huy Tran

Growth Drivers for 2025

Towards the end of 2024, stocks that were expected to benefit from public investment exhibited signs of capital inflows, signaling the market’s anticipation of new developments in economic investment.

Capital shifts in anticipation of the North-South high-speed railway project, which is estimated to contribute approximately 1 percentage point to GDP growth annually between 2025 and 2037, according to the General Statistics Office and the Ministry of Transport.

Statistics from Dragon Capital Fund Management show that in 2024, investment activities (both public and private) accounted for nearly 31% of GDP, while over 52% came from domestic consumption.

Exports were an unexpected factor contributing to high GDP growth last year, but this year’s growth will depend on public investment and domestic consumption. Public investment is expected to play a leading role in encouraging more robust private sector participation in the economy.

“2025 will witness breakthroughs in public investment, especially in the second half, unblocking private investment that has stagnated over the past three years,” said Le Anh Tuan, Dragon Capital’s Investment Director, at an investor conference earlier this year.

The government’s goal of promoting public investment is aligned with its ambition to achieve economic growth of more than 8% in 2025, setting the stage for a “double-digit” growth rate in the 2026-2030 period. “Ambitious public investment disbursements are key to attaining this GDP growth plan,” stated Yuanta Vietnam Securities Company in its report on public investment in 2024.

Specifically, for Ho Chi Minh City, analysts from the University of Economics Ho Chi Minh City (UEH) and the Ho Chi Minh City Statistics Office suggested that consumer spending showed uncertain signs of recovery, judging from the city’s total retail sales and service revenue. They recommended that the city focus its resources on expeditiously completing key infrastructure projects.

“The pace of addressing infrastructure challenges will be instrumental in determining the city’s growth rate in 2025 and play a pivotal role in shaping its growth trajectory in the next era,” the UEH report emphasized.

What Are the Opportunities to Activate It?

Most experts anticipate that public investment will be the primary driver of Vietnam’s economic growth in 2025, which is also the final year of the 2021-2025 medium-term public investment plan. The budget for development investment is expected to exceed 790 trillion VND, equivalent to approximately $30.8 billion, representing a 20% increase compared to the same period.

However, a longstanding challenge with public investment has been the slow disbursement and construction progress. The General Statistics Office’s 2024 report attributed the low level of actual investment from the state budget, which affected the overall public investment disbursement for the year.

Consequently, the realized capital from the state budget in 2024 is estimated at 661.3 trillion VND, equivalent to 84.6% of the annual plan and a mere 3.3% increase from the previous year. This figure falls significantly short of the levels achieved from 2016 onwards, excluding 2021, which witnessed a 7.1% decrease due to the impact of the COVID-19 pandemic.

According to analysts from Yuanta Vietnam Securities Company, last year’s slow progress was attributed to increased site clearance costs and the temporary suspension of several projects to accommodate adjustments due to the amended Land Law, awaiting the implementation of new laws taking effect in 2025, and pending official local planning.

Despite the low overall public investment disbursement in 2024, the analysts assessed that the long-term outlook appears brighter as the bottlenecks have been addressed. “The conditions are ripe for a year of accelerated public investment in 2025,” the report stressed.

The first essential condition is financial capacity, and there is now a favorable shift from consecutive years of budget deficits to a budget surplus. For the first time, state budget revenues exceeded 2 quadrillion VND, surpassing the target set by the National Assembly by over 19%. Additionally, public debt and government debt ratios remain within safe limits.

“We have a more considerable leeway in 2025 and the following years to increase public investment resources as a catalyst for critical infrastructure development, thereby facilitating private investment and enabling businesses to achieve further growth,” said Nguyen Duc Chi, Deputy Minister of Finance, at a recent event held at the Ho Chi Minh City Stock Exchange.

Another advantage is the enforcement of several new laws since January 2025, such as the Law on Public Investment, the Law on Investment in the Form of Public-Private Partnership (PPP), the Law on Planning, and the Law on Bidding. According to experts, these changes primarily aim to simplify regulations related to planning and public projects, granting more authority to local authorities.

This shift is expected to expedite project progress and resolve legal obstacles. However, there are risks associated with transferring funds from the state treasury into the economy.

In a mid-January sharing session, Nguyen Hoai Thu, CEO of VinaCapital’s Securities Investment Division, assessed that 2025 would present challenges, including weaker exports to the US and a slowdown in international tourist arrivals to Vietnam following a boom. While public investment is projected to increase compared to 2024, it may not fully compensate for the decline in economic activity.

Therefore, the domestic market should not solely rely on public investment but also accelerate the recovery of the real estate market and implement policies to stimulate domestic consumption. “There are many reasons to expect a rebound in domestic consumption this year,” Thu added.

Implementing Various Projects in the 2025-2030 Period

2024 witnessed several bright spots in public investment. For instance, Ho Chi Minh City inaugurated its first metro line; the Long Thanh Airport and Tan Son Nhat Airport’s Terminal 3 construction progressed; the North-South Expressway component projects achieved approximately 79% disbursement of the assigned plan; the 500 kV power line project was completed; the North-South high-speed railway project was approved, and the nuclear power plant project was restarted.

The year 2025 also marks the completion of several significant projects, such as the expected completion of 3,000 km of the North-South Expressway; and the activation of new projects like the North-South West Expressway with a total length of over 1,200 km across 23 provinces and cities.

By 2030, the country is projected to have over 5,000 km of expressways. The total investment in the railway sector is estimated at $151 billion, including urban railways; $11 billion in inland waterways, and $4 billion in the maritime sector.

Dung Nguyen

– 19:00 07/02/2025