Midterm internship report outline analysis of vietnam’s gdp from 2019 2023

Understanding how these trade deals affected the economy can help evaluate Vietnam’s progress and the connection between global trade policies and local economic performance.. Evaluatin

UNIVERSITY OF ECONOMIC AND BUSINESS

MIDTERM INTERNSHIP REPORT

OUTLINE ANALYSIS OF VIETNAM’S GDP FROM 2019 - 2023

Student: Ngo Ha Thanh An Pham Tran Gia Bach Dang Anh Thu

Nguyen Quynh Anh

Class: ECON 101.B Supervisor: Pham Xuan Truong

Hanoi, month .year

TABLE OF CONTENT

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2.1.1 Global economic context and its Iimpact on Vietnam 2.1.2 Domestic economic reforms and Policies ccccccsssesessssesesssesessssesessnees 2.1.3 Key macroeconomic indicators in Vietnam (inflation, trade, FDI) 2.2 GDP of Vietnamin 2019-2023 ecccesessessssesssesesescscsnsseseseseecscseatseeseseseeees 2.2.1 Analysis of GDP growth rate by year (2019-2023) 2.2.2 Sectoral contributiom to GDP (adriculture, industry, servic@$) 2.2.3 Regional contributions to GDP within Vietnam

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INTRODUCTION

0.1 Rationale of the Research

What makes an economy strong enough to survive sudden global disruptions and fast changes? For Vietnam, the years from2019 to 2023 were a true test of resilience During this time, the COVID-19 pandemic stopped industries in their tracks, new trade agreements changed how markets operated, and government policies worked to keep the

econony stable Despite these challenges, Vietnam’s economy not only endured but also

showed remarkable ability to adapt and grow This period is a fascinating example of how a developing economy can face uncertainty and still emerge as an important player inthe global market

Over the years, Vietnam has shifted from being mostly an agricultural economy to becoming more industrialized and modern This change has been accompanied by impressive GDP growth However, the period from 2019 to 2023 brought unique challenges and opportunities The COVID-19 pandemic had a massive impact, disrupting

both the global economy and Vietnam’s key industries, like exports, tourism, and

manufacturing Even with these difficulties, Vietnam adapted quickly by using digital technologies and diversifying its supply chains Studying how Vietnam’s GDP changed during this time offers valuable lessons on how a country can recover from glohal crises

Another important aspect of this research is Vietnam’s increasing role in international

trade The country joined major trade agreements, like the Comprehensive and Progressive Agreerrent for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreerrent (EVFTA), during these years These agreements had a strong influence

on trade and investment, boosting Vietnam’s GDP and strengthening its role in the global

supply chain Understanding how these trade deals affected the economy can help

evaluate Vietnam’s progress and the connection between global trade policies and local

economic performance

Within Vietnam, the government introduced significant reforms to improve the economy during this period Policies to promote innovation, expand the use of green energy, and develop the digital economy were accelerated These efforts also tackled hig challenges, such as climate change and corruption By looking at GDP data from 2019 to 2023, this research evaluates how effective these reforms were in driving economic growth and addressing these critical issues

Demographic changes add another layer of importance to this study Vietnam’s young

and growing population, along with its expanding middle class, has created new demand for goods and services This growing domestic consumption is both an opportunity and a challenge The research investigates how these demographic shifts helped boost GDP, while also examining the need for more jobs, better skills, and improved infrastructure to sustain economic growth

Finally, Vietnam’s economic performance during this time is not only important locally but also for the broader region and world As a key member of ASEAN, Vietnam’s

ability to maintain growth during a turbulent period offers lessons for other developing

countries facing similar challenges By carefully analyzing Vietnam’s GDP trends, this

research identifies patterns, evaluates government policies, and provides practical suggestions for the future

This study aims to deepen understanding of how Vietnam’s economy adapted during a

time of major change By exploring what helped and what hindered GDP growth, it contributes to the broader discussion on sustainable development and economic resilience

in developing markets

0.2 Aims and Objectives of the research

The main goal of this research is to study Vietnam’s GDP performance from 2019 to

2023 This period was shaped by major changes within the country and disruptions around the world The research focuses on understanding the main factors affecting GDP, the impact of government policies, and external influences onthe economy By doing so,

it aims to offer useful insights for policymakers, economists, and anyone interested in

Vietnam’s sustainable growth and development

To reachthis goal, the research is divided into four key objectives that address important

questions:

0.2.1 Assessing GDP Growth Trends (2019-2023):

The first objective is to study how Vietnam’s GDP grew during these five years The

research looks at yearly growth rates, the role of different sectors, and how the economy shifted over time It also considers how global challenges, like the COVID-19 pandemic, and changes within Vietnam affected its GDP

0.2.2 Identifying Influential Factors:

The second focus is to uncover what influenced Vietnam’s GDP during this period

External factors include global trade trends and economic disruptions, while internal ones cover reforms, population changes, and industrial growth The research also examines the effects of trade agreements like the CPTPP and EVFTA, as well as the role of new technologies in shaping economic performance

0.2.3 Evaluating Policy Effectiveness:

The third objective is to assess how effective government policies were in boosting economic growth from 2019 to 2023 Policies promoting innovation, digital

transformation, foreign investment, and sustainability are closely reviewed The study highlights successful approaches and points out areas where improvements are needed 0.2.4 Extracting Lessons and Recommendations:

Lastly, the research draws practical lessons fromthe findings to guide future economic

strategies It identifies what worked well and what didn’t, offering recommendations to improve Vietnam’s GDP growth in the future These lessons aim to strengthen the

economy, ensure steady growth, and help Vietnam achieve its goal of becoming a high-

income country

By combining these objectives, the research provides a clear and detailed understanding

of Vietnam’s economic journey during this transformative time It not only looks back at

what happened but also gives forward looking ideas to help shape better policies and economic plans for the future

0.3 Object and Scope of the research

This study examines Vietnam’s GDP performance from 2019 to 2023 The analysis aims

at economic trends, and the internal and external factors shaping GDP growth By focusing on this timeframe, the research captures the impacts of significant events, including the COVID-19 pandemic, global economic shifts, and Vietnam's recovery policies The scope is defined across three dimensions: time, space, and content 0.3.1 Scope of Time (2019-2023) The analysis covers the five-year period from 2019 to

2023, a period of significant economic change The year 2019 serves as a baseline to assess Vietnam’s pre-pandemic The years 2020 to 2022 highlight the effects of the pandemic, including economic contractions and subsequent recovery efforts Finally,

2023 offers insights into the nation’s post-pandemic recovery and stabilization This timeframe allows the study to explore short-term disruptions and the longer-term recovery trends that influenced GDP growth

0.3.2 Scope of Space

The space focuses on Vietnam’s national economy, analyzing domestic GDP

performance The research emphasizes nationwide trends rather than specific provinces

or cities, ensuring a broad understanding of the country’s overall economic performance

0.3.3 Scope of Content

This report provides an in-depth analysis of Vietnams GDP performance from 2019 to

2023, focusing on annual growth trends, sectoral contributions (agriculture, industry, and services), and regional economic dynamics It examines key macroeconomic indicators such as inflation, trade, and foreign direct investment (FDI) while considering the impact

of global events like the COVID-19 pandemic and domestic economic policies The study aims to offer a comprehensive understanding of Vietnam's economic developments and challenges during this period

0.4 Research methods:

In order to look into and analyze the GDP of Vietnam between 2019 and 2023 Official reports, forecasts and data fromthe World bank, The Asian Development Bank and the General Statistics Office of Vietnam are used Other specialized national and

international studies are also used in order to counter possible biases by any publishers in calculation and avoiding any hindsight while also expanding the viewpoint, enabling the subject to be studied from multiple points of view Thus pointing out, as many causes as possible affecting the GDP growth of Vietnam within the period

0.5 Structure of the report

e Introduction

e Chapter 1: Theoretical Background of GDP

e Chapter 2: Practical Situation of Vietnamis GDP in 2019-2023

e Chapter 3: Lessons Learned for Enhancing GDP inthe Future

e Conclusion

serves as a key indicator of a nation’s economic performance, reflecting the health, size,

and growth of its economy (Callen, 2024) GDP is widely used by policymakers, investors, and analysts to assess the economic strength of a country, nake comparisons between economies, and develop strategies for economic planning and development Gross Dorrestic Product can be categorized into two mentioned classifications: nominal GDP and real GDP Nominal GDP is calculated using current market prices and does not take inflation into consideration, making it useful for assessing the size of economies at a particular moment On the other hand, real GDP is adjusted for inflation, providing a more accurate representation of the true value of goocs and services produced This adjustment allows for a better comparison of economic performance across different time perioc

1.2 GDP Measurement

There are three main approaches to measuring GDP: the production approach, the income approach, and the expenditure approach Each provides a unique perspective on economic activity while ultimately yielding the same GDP value

1.2.1 Production approach

The production approach, also known as the value-added approach, calculates GDP by summing up the value added at each stage of production inthe economy It measures the contribution of each sector-such as agriculture, manufacturing, and services-to the economy

Formula:

GDP = Value of Output - Value of Intermediate Consumption

Here, value-added refers to the difference between the value of goods and services produced (output) and the cost of inputs (intermediate goods) used in production This method is useful for understanding the structure of an economy and the relative importance of different industries For instance, a high contribution fromthe services sector often indicates a developed economy

1.2.2 Income approach

The income approach calculates GDP by summing up all the incomes eared by factors

of production within a country These include wages for labor, rents for land, interest for

capital, and profits for entrepreneurship It also includes adjustments for taxes and subsidies on production

Formula:

GDP=w+i+Pr+R+ Te + Dep Where w = waqes

Formula:

GDP =C+I+G+NX Where C = Consumption

1.3 GDP Components

Gross Dorrestic Product (GDP) is the sum of consumption (C), investment (1),

government spending (G), and net exports (NX) These components can be analyzed from both the demand and supply perspectives to provide a holistic understanding of how

consumption of final goods is included to avoid double-counting, as intermediate goods are used to produce other goods and services For example, a family buying furniture or individuals paying for a movie ticket are activities that fall under consumption A healthy level of consumption usually indicates a confident consurrer hase, which contributes to a more robust economy

1.3.1.2 Supply-Side Analysis

Fromthe supply perspective, consumption depends on the availability and production of goods and services demanded by households Key aspects include productivity in consumer goock sectors and labor and capital input

Productivity in Consumer Goods Sectors: Industries like agriculture,

manufacturing, and services must produce efficiently to meet household neecs For example, a furniture manufacturer ensures a steady supply of quality furniture

to support consumer purchases

Labor and Capital Input: The supply of consumer goods depends on the labor and capital utilized in production processes High productivity leads to better affordability and availability of goods for consumption

1.3.2 Investment (1)

1.3.2.1 Dermand-Side Analysis

Investment in GDP refers to capital expenditures made by businesses and individuals on long-termassets, not to be confused with financial investments like stocks or bonds Examples include purchasing new equipment, residential construction, business inventory accumulation, and research and development (R&D) By investing in new technologies or additional resources, businesses prepare to meet future demand and stimulate economic growth

1.3.2.2 Supply-Side Analysis

Onthe supply side, investment is the creation of capital goods that enhance an

economy’s productive capacity Key factors include:

Capital Formation: Factories, machinery, and infrastructure are built to improve future production For example, a company investing in modern machinery

increases its manufacturing capacity.

Technological Advancerrents: Investments in R&D drive innovation and enhance

productivity across sectors

Supply Chain Dynamics: Investments improve supply chains, reducing production costs and increasing efficiency For example, when a Vietnamese electronics company invests in robotic assembly lines, it boosts productivity and reduces costs

1.3.3 Government spending (G)

1.3.3.1 Dermand-Side Analysis

Goverment spending includes all expenditures by federal, state, and local governments on goods, services, and transfer payments Examples include salaries for public servants, infrastructure projects, and social programs like Medicare or unemployment benefits Government spending stabilizes the economy by mitigating business cycle fluctuations and fostering longer-term growth

1.3.3.2 Supply-Side Analysis

From the supply perspective, government spending enhances the economy’s

productive capacity and infrastructure Key aspects include:

Infrastructure Development: Governrrent-funded projects like roads, ports, and power plants improve logistics and reduce costs for businesses

Human Capital Development: Investments in education and healthcare enhance workforce productivity

Public Goods: Spending on security, law enforcement, and communication networks facilitates smoother business operations For example, when Vietnam invests in expanding the North-South Expressway, it reduces transportation time and costs, making industries more competitive

1.3.4 Nel exports (NX)

1.3.4.1 Dermand-Side Analysis

Net exports are calculated as the value of exports (X) minus the value of imports (M) This indicator shows whether a country earns more from selling goods and services abroad or spends more on foreign goocs It affects GDP as follows: Trade Surplus (NX > 0, X > M): A country exports more than it imports, positively contributing to GDP

Trade Deficit (NX <0, X <M): A country imports more than it exports, which could harmthe economy if it becomes too dependent on imports

Balanced Trade (NX = 0, X = M): Exports and imports are equal, resulting ina neutral trade balance

1.3.4.2 Supply-Side Analysis

The supply-side view of net exports focuses on a country’s production capabilities

and competitiveness in global markets Key aspects include:

Export Productivity: Efficient production and competitive pricing drive strong

export performance For example, Vietnam’s textile industry thrives due to its

cost-efficient production processes

Import Substitution: Developing domestic industries reduces reliance on imports, strengthening the supply side of the economy

Global Supply Chains: Integration into global production networks boosts exports, especially for countries like Vietnam, which participate in producing intermediate goods like electronics

1.4 Factors Affecting GDP in Short-Run and Long-Run

1.4.1 Factors in sh0ri-run

While GDP serves as a vital measure of a nation's economic health, it is not a static number; instead, it fluctuates due to various dynamic factors Inthe short run, these fluctuations are primarily driven by immediate changes in aggregate demand, monetary policies, and unforeseen external shocks Understanding these factors provides insight into the economy's responsiveness and vulnerahility to short-term influences, laying the foundation for strategies to stabilize and foster growth

1.4.1.1 Aggregate Demand Fluctuations

One of the most significant contributors to short-term GDP fluctuations is aggregate demand, which represents the total demand for goods and services within an economy at a specific price level andtime Aggregate demand is highly sensitive to changes in consumer spending, business investment, and government policy

adjustments For instance, when governments reduce income taxes, households have more money to spend, thereby boosting economic activity In contrast, reduced disposable income due to wage stagnation or increased taxes leads to lower consumption, constraining GDP growth Consumer confidence is another critical factor; when people feel optimistic about their financial future, they are more likely to make significant purchases, while uncertainty or fear of economic downturns encourages saving over spending Additionally, the availability of credit influences consumption patterns In times of low interest rates, such as

during the Federal Reserve’s rate cuts in 2020, borrowing becomes more

accessible, enabling households to finance significant expenditures like housing or durable goock

Business Investment

Closely linked to consumer behavior is business investment, which also

significantly impacts aggregate demand in the short run Businesses decide to invest based on their expectations of future profitability, interest rates, and prevailing market conditions When firms anticipate strong demand for their products, they are more likely to invest in expanding production capacity, hiring workers, or acquiring new technologies, all of which stimulate GDP growth On the other hand, economic uncertainty or declining profit margins often lead to reduced investirent Interest rates play a critical role in shaping investment decisions; lower rates reduce borrowing costs, making it more attractive for firms

to finance capital expenditures, while higher rates have the opposite effect Moreover, stable market conditions encourage firms to take risks and pursue growth opportunities, whereas instability, such as geopolitical tensions or supply chain disruptions, can delay or deter investrrent plans, thereby limiting short-term

economic expansion

Governrent Policies

Govemrrent policies also exert a powerful influence on short-term GDP moverrents through fiscal measures such as government spending and taxation Increased government spending on infrastructure projects, social prograrns, or public services injects money directly into the economy, creating jobs and boosting aggregate demand For example, stimulus packages implemented during economic downturns are often designed to offset reduced private-sector activity by increasing public investment Tax policies complement these efforts; when governments lower taxes, households and businesses are left with more disposable income to spend and invest, respectively, which helps to drive economic growth Conversely, austerity measures, including spending cuts or tax increases, can have

a contractionary effect, dampening short-term GDP growth

1.4.1.2 Monetary Policy

In addition to aggregate demand dynamics, monetary policy plays a critical role in shaping short-run economic outcomes Central banks use tools such as interest rate adjustments and money supply management to influence GDP

Interest Rate Changes

Lowering interest rates makes borrowing cheaper for both consumers and businesses, encouraging spending and investment For instance, during the COVID-19 pandemic, the Federal Reserve rapidly cut rates to stimulate economic activity (Milstein and Wessel, 2024) Similarly, Vietnam's State Bank used rate reductions in 2011 to combat slowing growth (General Statistics Office of Vietnam, 2023) Conversely, higher rates, while useful for controlling inflation,

can reduce economic activity

Quantitative Easing

Beyond interest rates, central banks can implement quantitative easing, a strategy that injects money into the economy to increase liquidity and spur demand However, restrictive monetary policies aimed at curbing inflation often reduce money supply, which, while necessary for long-termstability, may slow GDP growth in the short run

Typhoon Damrey in 2017 caused extensive damage to Vietnam’s agricultural and

industrial sectors, temporarily reducing GDP (World Bank, 2018) However, recovery efforts, such as government-funded reconstruction, often provide a short- term boost to economic activity

Political Instahility

Political instability is another source of external shock Events such as wars, regime changes, or widespread protests can undermine investor confidence, disrupt trade, and create uncertainty that slows economic growth

Global Economic Crises

Similarly, global economic crises, such as the 1997 Asian Financial Crisis,

significantly affected Vietnam’s exports and foreign investments, highlighting the

vulnerability of smaller economies to external economic conditions (International Monetary Firm, 1999)

Insummary, short-term GDP dynamics are shaped by a complex interplay of aggregate demand fluctuations, monetary policy actions, and external shocks These factors highlight the inherent volatility of economic systems and underscore the importance of proactive policymaking to mitigate risks By understanding these drivers, policymakers can design strategies to stabilize the economy, ensuring sustainable growth even in the face of short-term challenges

1.4.2 Factors in long-ran

1.4.2.1 Economic Group

The GDP inthe long run is driven by structural and foundational factors that determine an economy's capacity to increase its output over time These factors influence productivity, innovation, and the efficient utilization of resources Key determinants include:

a Capital

Capital shapes long-run GDP by enabling productivity improvements, technological progress, and structural transformations However, its benefits depend on complerrentary factors like skilled labor, innovation, and effective resource allocation It has two main attributes quantity based onthe amount of capital available to the economy fromdormestic and foreign sources, and quality based on the quality of the capital market and the capital quality fromthe investors

b Natural resources

Natural resources play a significant role inshaping a country's GDP inthe long run Their availability, management, and use affect productivity, economic stability, and growth trajectories However, the impact of natural resources on long-termGDP depends on several factors, including their abundance, sustainability, and how effectively they are leveraged

c Labor force

The labor force is a critical determinant of GDP in the long rum, as it

directly contributes to an economy’s productive capacity The size, quality,

and productivity of the labor force influence how effectively a country utilizes other factors of production, such as capital and natural resources, to drive economic growth The quality of the labor force is based on how educated, which in turn directly decides how productive the labor force is, while the quantity is based on the sheer amount of labor being supplied to the economy

c Culture

Culture significantly influences GDP by shaping individual behaviors, societal norms, and institutional structures that affect productivity, innovation, and economic growth While culture's effects on GDP are indirect and complex, they operate through various mechanisms that influence how resources are utilized and how economies function For example, cultures that undermine women can he significantly decreasing their potential labor force, not utilizing the labor force to the fullest

CHAPTER 1 Chapter 1: Theoretical Background of GDP

1.1 Definition of GDP:

Gross Dorrestic Product (GDP) is the market value of all final goods and services produced within an economy ina given period of time, typically a quarter or a year It

serves as a key indicator of a nation’s economic performance, reflecting the health, size,

and growth of its economy (Callen, 2024) GDP is widely used by policymakers, investors, and analysts to assess the economic strength of a country, nake comparisons between economies, and develop strategies for economic planning and development Gross Dorrestic Product can be categorized into two mentioned classifications: nominal GDP and real GDP Nominal GDP is calculated using current market prices and does not take inflation into consideration, making it useful for assessing the size of economies at a particular moment On the other hand, real GDP is adjusted for inflation, providing a more accurate representation of the true value of goocs and services produced This adjustment allows for a better comparison of economic performance across different time perioc

1.2 GDP Measurement

There are three main approaches to measuring GDP: the production approach, the income approach, and the expenditure approach Each provides a unique perspective on economic activity while ultimately yielding the same GDP value

1.2.1 Production approach

The production approach, also known as the value-added approach, calculates GDP by summing up the value added at each stage of production inthe economy It measures the contribution of each sector-such as agriculture, manufacturing, and services-to the economy

Formula:

GDP = Value of Output - Value of Intermediate Consumption

Here, value-added refers to the difference between the value of goods and services produced (output) and the cost of inputs (intermediate goods) used in production

This method is useful for understanding the structure of an economy and the relative importance of different industries For instance, a high contribution fromthe services sector often indicates a developed economy

1.2.2 Income approach

The income approach calculates GDP by summing up all the incomes eared by factors

of production within a country These include wages for labor, rents for land, interest for capital, and profits for entrepreneurship It also includes adjustments for taxes and subsidies on production

Formula:

GDP=w+i+Pr+R+ Te + Dep Where w = waqes

Formula:

GDP =C+I+G+NX Where C = Consumption

1.3 GDP Components

GDP is the sum of consumption (C), investment (I), government spending (G), and net exports (NX)

1.3.1 Consumption (C)

Consumption is often regarded as the largest component of a country's Gross Dorrestic Product (GDP) It encompasses all the goods and services that are purchased by households for personal use From everyday items like groceries and clothing to larger purchases suchas new cars and horre appliances, consumption reflects the spending habits of individuals It's noteworthy that in calculating GDP, only the consumption of final goods is considered to avoid double-counting, as intermediate goods are used to produce other goods and services To illustrate, a family buys furniture for their home or individuals pay for a movie ticket; these are consumer activities that fall under the consumption component of GDP A healthy level of consumption usually indicates a confident consumer hase, leading to a more robust economy

1.3.2 Investment (I)

Investing within GDP is not to be confused with financial investments like stocks or bonds Instead, it refers to the capital expenditures made by businesses and individuals towards long-term assets These investments are made withthe expectation that they will yield productive benefits over the years For example, when a company purchases new equipment to upgrade its manufacturing facility, this is considered an investment in economic terms Residential construction, business inventory accurmlation, and research and developrrent (R&D) also fall under this bracket Types of investments include business investments in capital goods, the construction of new residences, and changes in business inventories By investing in new technologies or additional resources, businesses prepare to meet future demand, stimulate economic growth

1.3.3 Government spending (G)

Govermrent spending is a core pillar of GDP and includes all government consumption, investment, and transfer payments It involves spending on goods and services that the government needs to perform its functions, such as paying the salaries of public servants and investing in infrastructure projects like building roads or schools This spending often acts as a stabilizer in the economy, helping to mitigate the highs and lows of business cycles It includes expenditures fromall levels of government - federal, state, and local - and covers areas such as building and maintaining infrastructure, funding social prograrrs like Medicare or unemployment benefits, and ensuring defense and public safety Government spending decides significant economic activity and can have immediate influence and longer-term effects on GDP

1.3.4 Nel exports (NX)

Net exports, a crucial indicator of a country's economic engagement with the world, are calculated as the value of goods and services a country exports (X) minus the value of those it imports (M) This number helps us understand if a country is earning more by selling goods and services or spending more on buying them It also affects the country’s GDP, which measures its economic growth

1.3.4.1 Trade Surplus (NX > 0, X >M):

When a country exports more than it imports, it has a trade surplus This means it sells more to the world than it buys, adding positively to its economy For example, if Vietnamsells many textiles or garments to the United States, these sales count as exports, improving its trade balance

1.3.4.2 Trade Deficit (NX <0, X <M):

If a country imports more than it exports, it has a trade deficit This means it spends more on foreign goods and services than it earns For example, if Vietnam buys a lot of machinery or electronic parts from China but sells fewer textiles in return, this creates a trade deficit This could be bad for the economy if it becomes too dependent on imports

1.3.4.3 Balanced Trade (NX =0, X =M):

When exports and imports are equal, the trade balance is neutral This means the country is buying and selling the same amount, which neither helps nor harrrs its economy directly

Vietnam’s trade balance shows how well it manages its exports like textiles while

handling imports like machinery By looking at this, we can understand how Vietnam interacts with the global economy

1.4 Factors Affecting GDP in Short-Run and Long-Run

1.4.1 Factors in sh0ri-run

While GDP serves as a vital measure of a nation's economic health, it is not a static number; instead, it fluctuates due to various dynamic factors Inthe short run, these fluctuations are primarily driven by immediate changes in aggregate demand, monetary policies, and unforeseen external shocks Understanding these factors provides insight into the economy's responsiveness and vulnerahility to short-term influences, laying the foundation for strategies to stabilize and foster growth

1.4.1.1 Aggregate Demand Fluctuations

One of the most significant contributors to short-term GDP fluctuations is aggregate demand, which represents the total demand for goods and services within an economy at a specific price level andtime Aggregate demand is highly sensitive to changes in consumer spending, business investment, and government

policy

a Consumer Spending (C)

Consumer spending often plays the most pivotal role, given its status as the largest component of aggregate demand Variations in consumer spending are closely tied

to disposable income, which rises or falls based on tax policies or wage

adjustments For instance, when governments reduce income taxes, households have more money to spend, thereby boosting economic activity In contrast, reduced disposable income due to wage stagnation or increased taxes leads to lower consumption, constraining GDP growth Consumer confidence is another critical factor; when people feel optimistic about their financial future, they are more likely to make significant purchases, while uncertainty or fear of economic downturns encourages saving over spending Additionally, the availability of credit influences consumption patterns In times of low interest rates, such as

during the Federal Reserve’s rate cuts in 2020, borrowing becomes more

accessible, enabling households to finance significant expenditures like housing or durable goock

Business Investment

Closely linked to consumer behavior is business investment, which also

significantly impacts aggregate demand in the short run Businesses decide to invest based on their expectations of future profitability, interest rates, and prevailing market conditions When firms anticipate strong demand for their products, they are more likely to invest in expanding production capacity, hiring workers, or acquiring new technologies, all of which stimulate GDP growth On the other hand, economic uncertainty or declining profit margins often lead to reduced investirent Interest rates play a critical role in shaping investment decisions; lower rates reduce borrowing costs, making it more attractive for firms

to finance capital expenditures, while higher rates have the opposite effect Moreover, stable market conditions encourage firms to take risks and pursue growth opportunities, whereas instability, such as geopolitical tensions or supply chain disruptions, can delay or deter investrrent plans, thereby limiting short-term

economic expansion

Governrent Policies

Govemrrent policies also exert a powerful influence on short-term GDP moverrents through fiscal measures such as government spending and taxation Increased government spending on infrastructure projects, social prograrns, or public services injects money directly into the economy, creating jobs and boosting aggregate demand For example, stimulus packages implemented during economic downturns are often designed to offset reduced private-sector activity by increasing public investment Tax policies complement these efforts; when governments lower taxes, households and businesses are left with more disposable income to spend and invest, respectively, which helps to drive economic growth

Conversely, austerity measures, including spending cuts or tax increases, can have

a contractionary effect, dampening short-term GDP growth

1.4.1.2 Monetary Policy

In addition to aggregate demand dynamics, monetary policy plays a critical role in shaping short-run economic outcomes Central banks use tools such as interest rate adjustments and money supply management to influence GDP

Interest Rate Changes

Lowering interest rates makes borrowing cheaper for both consumers and businesses, encouraging spending and investment For instance, during the COVID-19 pandemic, the Federal Reserve rapidly cut rates to stimulate economic activity (Milstein and Wessel, 2024) Similarly, Vietnam's State Bank used rate reductions in 2011 to combat slowing growth (General Statistics Office of Vietnam, 2023) Conversely, higher rates, while useful for controlling inflation,

can reduce economic activity

Quantitative Easing

Beyond interest rates, central banks can implement quantitative easing, a strategy that injects money into the economy to increase liquidity and spur demand However, restrictive monetary policies aimed at curbing inflation often reduce money supply, which, while necessary for longtermstability, may slow GDP growth in the short run

Typhoon Damrey in 2017 caused extensive damage to Vietnam’s agricultural and

industrial sectors, temporarily reducing GDP (World Bank, 2018) However, recovery efforts, such as government-funded reconstruction, often provide a short- term boost to economic activity

Political Instahility

Political instability is another source of external shock Events such as wars,

regime changes, or widespread protests can undermine investor confidence, disrupt trade, and create uncertainty that slows economic growth

c Global Economic Crises

Similarly, global economic crises, such as the 1997 Asian Financial Crisis,

significantly affected Vietnam’s exports and foreign investments, highlighting the

vulnerability of smaller economies to external economic conditions (International Monetary Firm, 1999)

Insummary, short-term GDP dynamics are shaped by a complex interplay of aggregate demand fluctuations, monetary policy actions, and external shocks These factors highlight the inherent volatility of economic systems and underscore the importance of proactive policymaking to mitigate risks By understanding these drivers, policymakers can design strategies to stabilize the economy, ensuring sustainable growth even in the face of short-term challenges

1.4.2 Factors in long-ran

1.4.2.1 Economic Group

The GDP inthe long run is driven by structural and foundational factors that determine an economy's capacity to increase its output over time These factors influence productivity, innovation, and the efficient utilization of resources Key determinants include:

a Capital

Capital shapes long-run GDP by enabling productivity improvements, technological progress, and structural transformations However, its benefits depend on complerrentary factors like skilled labor, innovation, and effective resource allocation It has two main attributes quantity based onthe amount of capital available to the economy fromdormestic and foreign sources, and quality based on the quality of the capital market and the capital quality fromthe investors

b Natural resources

Natural resources play a significant role inshaping a country's GDP inthe long run Their availability, management, and use affect productivity, economic stability, and growth trajectories However, the impact of natural resources on long-termGDP depends on several factors, including their abundance, sustainability, and how effectively they are leveraged

c Labor force

The labor force is a critical determinant of GDP in the long rum, as it

directly contributes to an economy’s productive capacity The size, quality,

and productivity of the labor force influence how effectively a country utilizes other factors of production, such as capital and natural resources, to drive economic growth The quality of the labor force is based on how educated, which in turn directly decides how productive the labor force is, while the quantity is based onthe sheer amount of labor being supplied to the economy

c Culture

Culture significantly influences GDP by shaping individual behaviors, societal norms, and institutional structures that affect productivity, innovation, and economic growth While culture's effects on GDP are indirect and complex, they operate through various mechanisms that influence how resources are utilized and how economies function For example, cultures that undermine women can he significantly decreasing their potential labor force, not utilizing the labor force to the fullest Chapter 2: Practical Situation of Vietnam's GDP in 2019-2023 (~12 pages)

2.1 Overview of Economic Landscape in 2019-2023

2.1.1 Global economic context and its impact on Vietnam

2.1.1.1 Global Economy between 2019 and 2023

Between 2019 and 2023, the global economy experienced significant turbulence due to major events, including the COVID-19 pandemic, and the Russia-Ukraine war amongst many other geopolitical events that interrupted trade and manufacturing, alongside evolving technological trends that had shifted the balance in technological and

manufacturing capabilities between major economic powerhouses like the US, China, and the EU

In 2019, trade tensions and slowing growth signaled vulnerahilities, In 2019, the global economy experienced moderate growth of around 2.8%, marking a slowdown from previous years due to rising uncertainties and structural challenges The U.S.-China trade war dominated economic discourse, disrupting global supply chains and weighing

on business investment Advanced economies, including the U.S and the Eurozone, saw weakening growth as manufacturing activity slowed and trade volumes contracted Central banks, such as the U.S Federal Reserve and the European Central Bank, shifted toward accommodative monetary policies to counteract economic deceleration Emerging rmarkets faced mixed fortunes; while countries like Vietnam benefited fromtrade realignments, others, such as India and Brazil, struggled with structural issues and reduced investor confidence Concerns over rising debt levels, climate change, and geopolitical tensions added to the overall fragility Despite these challenges, sectors like technology and digital services continued to expand, underscoring the resilience of innovation-driven industries in a period of global economic uncertainty

The global economy in 2020 faced glohal GDP contracting by approximately 3.1% due to an unprecedented challenge of the global pandemic COVID-19 The crisis disrupted nearly all sectors, leading to widespread lockdowns, supply chain breakdowns, and surging unemployrrent rates, particularly in industries like tourism, hospitality, and retail Governments and central banks implemented massive fiscal stimulus measures and

monetary easing to stabilize economies, includingthe U.S CARES Act and central bank rate cuts Advanced economies provided substantial support, but developing nations struggled with limited resources, widening the global inequality gap The pandemic accelerated digital transformation, as remote work, e-commerce, and online services surged However, global trade slowed, and energy markets experienced severe

disruptions, with oil prices briefly turning negative The uneven impacts of the crisis, coupled with health disparities and a delayed vaccine rollout in lower-income countries, underscored deep systemic vulnerabilities inthe global economy

The recovery in 2021 is an inevitable result of when the pandemic was controlled, thus, letting the economic system re-ignited The global economy rebounded strongly with an estimated growth of 6.3%, driven by vaccine rollouts, pent-up consumer demand, and continued fiscal and monetary stimulus Advanced economies, particularly the U.S and Europe, led the recovery, while many emerging markets faced slower progress due to limited vaccine access and pandemic- related challenges Inflation emerged as a major concern, fueled by surging demand, supply chain disruptions, and rising energy prices Labor markets underwent significant shifts, including widespread resignations and labor shortages, as workers reevaluated priorities during the pandemic Global trade improved, but bottlenecks in shipping and manufacturing persisted, contributing to rising costs The recovery was uneven, highlighting disparities between high-income and low-income nations, as well as sectoral differences, with technology and e-commerce thriving while travel and hospitality struggled to recover fully This period also saw a renewed focus on sustainahility and energy transitions, as governments and businesses prioritized green investments amid the recovery

In 2022, the global economy faced heightened uncertainty, marked by geopolitical tensions, persistent inflation, and uneven growth The Russia-Ukraine war, which began

in February, had far-reaching consequences, disrupting global energy and food markets and driving inflation to multi-decade highs in many countries that have high trade

volumes with either Ukraine or Russia, for example Lebanon’s food security in 2022 had

been at time severely endangered as a result of the source of grain from Ukraine being cut off by the Russian naval blockade inthe Black Sea Europe experienced an energy crisis

as it sought to reduce dependence on Russian gas, its conventional gas supplier for decades with established infrastructures, while developing nations faced food security challenges due to reduced grain exports as the combats prevented goods from Ukraine from being exported, while Russian goods faced heavy embargo fromthe international, mostly led by the US Central banks, including the U.S Federal Reserve, aggressively raised interest rates to combat inflation, leading to tighter financial conditions and slowing growth, particularly in advanced economies Emerging markets were pressured

by a strong U.S dollar and rising debt burdens, with some countries, like Sri Lanka,

experiencing severe economic crises China’s economy slowed significantly due to strict

COVID-19 policies and challenges in its property sector, dampening global trade and demand for commodities Despite these challenges, sectors like renewable energy and digital transformation continued to grow, reflecting long-term structural shifts amid global economic instability

By 2023, the global economy showed resilience amid slowing growth, moderating inflation, and persistent geopolitical tensions Global GDP grew by approximately 2.7%, with advanced economies decelerating sharply due to the lagged effects of central bank rate hikes, while emerging markets, particularly in Asia, drove much of the global expansion Inflation began to ease in many regions as supply chains stabilized and energy prices moderated, though food and energy markets remained volatile Geopolitical dynamics continued to reshape the global economic landscape, withthe U.S.-China rivalry leading to many economic attacks and retaliation through the means of economic protection, influencing trade and technology, and the expansion of BRICS signaling a shift toward multipolar economic alliances Europe's energy crisis abated but left lasting impacts on its energy transition strategies Meanwhile, technological advances,

particularly in artificial intelligence and clean energy, gained momentum, reshaping industries and global investments Despite some improvements, challenges such as high public debt, climate risks, and inequality persisted, enphasizing the need for sustainable and inclusive growth strategies

2.1.1.2 Global Economy’s impact on Vietnam

During the 5 years between 2019 and 2023, Vietnam’s economy as a developing country

and as a country with high trade volume with both China and the US, was highly affected

by international economic and geopolitical trends According to the data fromthe World

Bank, Vietnam’s economic growth in this period remained positive, with the lowest year

being 2021 at 2.6% The impact of the COVID-19 pandemic on Vietnam was immense for many reasons, such as the proximity to China making Vietnam one of the earliest countries to report having patients contracted COVID, there was also the strict policy of the Chinese government to closing the border, blocking trade between the two countries, this was particularly negative for Vietnamsince China is Vietnam biggest trade partner However, as for 2022 onward, with China re-opening its border, China- Vietnam trade has returned to pre-pandemic level and is steadily rising Another major trade partner of Vietnam was the US, in 2019-2020, toward the end of President Donald Trump’s first term the rising tension between China and the US in trade led to the implementation of tariffs on many imported goods, some of which were exported from Vietnam On the other hand, the tension between the US and China also brought the chance to Vietnam as many corporations moved their manufacturing facilities out of China, to other developing

countries including Vietnam Other things to focus on are the FDI inflow, low cost of labor, favorable policies fromthe government, social stability, and the positive growth prospect that made Vietnam an attractive destination for FDI, reaching a peak level in history in 2023

2.1.2 Domestic economic reforms and policies

Vietnams domestic economic policies from 2019 to 2023 reflected a combination of proactive fiscal and monetary strategies aimed at stabilizing the economy amidst global challenges such as the COVID-19 pandemic and economic slowdowns in major trade partners Key measures included public investment to stimulate growth, accommodative monetary policies to control inflation, and initiatives to boost domestic consumption and foreign direct investment (FDD

2.1.2.1 Domolicestic Pies

Public investment was a critical driver of Vietnam’s recovery, with disbursements

reaching significant levels by 2023, directly supporting sectors like construction and

creating employment opportunities

However, challenges persisted, including declining trade volumes, slow credit growth, anda struggling real estate sector, with some cases of fraud showing the lack of control fromthe authority inthe capital market, losing the belief of investors, and losing the potential investment from many personal investors for the economy as they are more likely to put money into commodities like gold and real estate This trend has led to the overpricing of real estate making this sector become stagnant, unbalancing the supply and

demand price, the gold’s price was also overly inflated These commodities inflation

adversely affected the lives of the people, especially the middle and lower class Therefore, Vietnam’s authority has been trying to establish regulations to stabilize the

price of these commodities Vietnam’s fiscal policies included VAT cuts and targeted

social safety nets, while monetary policies were focused on maintaining low interest rates

to boost economic activity The government emphasized the efficient implementation of policies to maximize the impact of public investment and foster a recovery in domesiic demand and exports

2.1.2.2 Foreign policies

Vietnam's foreign economic policies from 2019 to 2023 were driven by an agenda of international integration, export growth, and attracting foreign direct investment (FDI) The country leveraged its extensive network of free trade agreerrents (FTAs), including

joining the Regional Comprehensive Economic Partnership (RCEP) in 2022 and finalizing the EU-Vietnam Free Trade Agreement (EVFTA) These FTAs opened up access to key markets, reduced tariffs, and enhanced trade competitiveness Vietnam also sought new economic partnerships, such as exploring an FTA withthe South American MERCOSUR bloc in 2023

FDI also remained a cornerstone of Vietnam's economic strategy, attracting the strong wave of international enterprises moving their capital and facilities out of China

after the trade war between China and the US Furthermore, Vietnam’s government also

airs to diversify the source of FDI, so that MNEs would not only invest in Vietnam for low-value manufacturing jobs like leather and clothes but to climb the ladder in the supply chain, getting more lucrative jobs trying to break out of the middle-income trap The government also promoted domestic manufacturing companies, encouraging them to gain control of the technology, and pushing for the research and development(R&D) sector FDI was a central pillar of Vietnam's foreign economic strategy By 2023, FDI inflows had reached $28.85 billion, withthe manufacturing and processing industries attracting the majority of investment Key investors included Singapore, South Korea, Japan, and China Vietnams competitive labor costs and improving infrastructure continued to draw manufacturing-focused FDI, although challenges such as rising wages, environmental concerns, and global economic uncertainties presented obstacles

To maintain its appeal to investors, Vietnam emphasized administrative reforms, anti-corruption measures, and improvements in workforce skills Additionally, the government prioritized green and sustainable economic practices, aligning with global trends by setting clear environmental standards for FDI projects and committing to net- zero emissions by 2050

Overall, Vietnam's foreign economic policies from 2019 to 2023 were

characterized by proactive global engagement, efforts to attract high-quality investment, and a focus on sustainable and inclusive economic growth

2.1.3 Key macroecononic indicators in Vietnam (inflation, trade, FDI)

According to the World Bank and Vietnam General Statistics Office, Vietnam’s

GDP inthe period 2019-2023 had risen consistently, even in the year 2020, when the global GDP growth rate plummeted to negative, and Vietnam maintained positive

economic growth Vietnam’s economy also recovered fast after the pandemic when 2022

had already surpassed the pre-pandemic level However, the global events showed effects

in 2023, when economic growth slowed down, following the global trend, combined with

a high inflation rate similar to that of the pandemic era, suggesting there might be actions fromthe government needed to stabilize the economy

2.2.1 Analysis of GDP growth rate by year (2019-2023)

The graph shows the annual GDP growth rate from 2019 to 2023, illustrating the economic slowdown in 2020 due to the pandemic, followed by a sharp recovery in 2022 anda steady growth forecast for 2023