FMCG News
Written by Thinh Luu
Vietnam’s Economy and FMCG Outlook
2023-2026
Vietnam’s Economy
Vietnam’s economy is export oriented. Vietnam is a regional leader in terms of attracting foreign investment into manufacturing industries. Private consumption accounts for more than half of GDP, but household incomes are still low by regional comparison. Vietnam will remain one of the fastest-growing economies in the region in 2023-2026. Growth will be dependent on the expansion of labor-intensive manufacturing and related services industries. Economic liberalization will dominate the policy agenda in 2023-2026. This will encompass the downsizing of the role of the state in many sectors and encouraging more foreign direct investment (FDI) into Vietnam.
(*)2023-2024: More outbound goods face lower tariffs upon entry to the EU, particularly fisheries and processed agro-products. Tax on revenue generated by e-commerce sales is raised above 1.5%. The value-added tax (VAT) returns to 10%.
(*)2025-2026: Controls on onshore foreign-exchange trading remain in place, despite advances in cross-border financial transfer. Employers’ and employees’ social-security contributions rise. The Government introduces new tax incentives for high-tech manufacturing investment.
The Lunar New Year (Tet) is the busiest season of the year in Vietnam, generating massive demands for shopping, gifting, and travelling across the country. Consumers will place high expectations on brands to deliver in terms prices – products – services especially in the context of rising inflation in Vietnam and the rest of world.
Vietnam’s FMCG
Vietnam is less exposed to global inflationary pressures compared with other emerging markets. The Government’s efforts, including the two cuts so far this year to the environmental tax on fuel, and the temporary VAT rate reduction in February 2022, from 10% to 8%, for a subset of goods and services, will also help. The retail sales growth, in volume terms, to rebound sharply in 2022 to 8%, after a decline in 2021. Thereafter, growth will moderate for the rest of our forecast period, averaging 6.4% per year in 2023-2026. The Government aims for 55% of the population to use e-commerce by 2025. State-driven initiatives intend to support robust infrastructure, remove entry barriers, and increase the popularity of digital payments. Helped by such programs, the gradual emergence of the country’s start-up sector will attract foreign investors, while offering consumers new way to shop.
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