HCM City (VNS/VNA) - A 40% increase in infrastructure investment that the Vietnamese Government is now planning would add approximately 2 percentage points to Vietnam’s 2025 GDP growth - if the Government manages to hit its disbursement targets this year, according to Michael Kokalari, chief economist at VinaCapital.
In his latest report, he said the Government increased its 2025 infrastructure spending target from 6% to 7% of GDP last week and simultaneously lifted its GDP growth target for 2025 from 7% to 8%.
“The increased 1% of GDP of planned spending on infrastructure projects should help the country achieve the Government’s new, 1% higher 2025 GDP growth target and will also support the country’s long-term growth prospects and appeal to foreign investors.
“The Government’s newly approved plan to increase infrastructure investment by nearly 40% this year to 36 billion USD (up from the 31 billion USD originally approved late last year), should help offset the hit to the country’s GDP growth we expect from slower export growth to the US, following a 23% surge in Vietnam’s exports to the US last year.”
The report also highlighted the Government’s strong commitment to public investment disbursement this year.
Several large projects were initiated/approved over the last two months, including a 67 billion USD high-speed rail line that would span the length of the country and the 8 billion USD Lao Cai - Hanoi - Hai Phong railway.
Meanwhile, the first section of Ho Chi Minh City’s long awaited metro line opened in December 2024, which VinaCapital believes is helping to support enthusiasm and momentum for accelerated infrastructure development going forward.
Kokalari pointed out that the Government had ample fiscal resources to ramp up spending.
“Government debt is well below 40% of GDP, and we estimate that the Government has over 40 billion USD of undisbursed funds previously earmarked for infrastructure spending.
“The primary bottlenecks to increasing infrastructure spending (or to achieving annual spending targets) have been bureaucratic issues impeding the project approvals and other processes entailed in large-scale project development,” he said.
Three major laws came into effect last month that are directly aimed at accelerating project approvals, streamlining investment disbursements, and driving greater private sector participation in infrastructure projects, and the laws should help expedite progress and ensure that spending targets are achieved.
Kokalari said more than 80% of planned infrastructure spending this year would be earmarked for boosting the country’s electricity generation and distribution capacity, and for improving its transportation network. By 2030, Vietnam aims to double the total length of its highway network, double airport passenger capacity and increase the country’s seaport capacity by 50%.
The country’s Power Development Plan VIII, approved in 2023, anticipates 9% annual electricity consumption growth for the foreseeable future. Vietnam will need 135 billion USD to double Vietnam’s electricity generation capacity over 2021-2030 with most of that growth expected to come from LNG (37% of total planned capacity growth), renewables (27%), and coal (19%), according to Kokalari.
The report also highlighted that in early 2025, the Government announced additional public investments into large infrastructure projects related to railways and ports to further streamline freight movement, improve workforce mobility, and facilitate more FDI inflows into Vietnam.
The Lao Cai - Hanoi - Hai Phong rail lines (and two other lines of Lang Son – Hanoi and Mong Cai – Ha Long – Hai Phong) would link nine provinces in Vietnam to China’s Yunnan province, enabling a more efficient flow of goods across the two countries. This railway may also facilitate the transit of Vietnamese goods to Europe through China.
Regarding ports, the Government’s recent revision of its seaport development plan added the Can Gio port project, which would accommodate larger vessels, supporting the country’s goal of increasing its seaport capacity by 50% by 2030, the report stated./.
VNA
