Economic growth is an important factor determining the growth rate of economic sectors in general and the real estate and construction industries in particular. A strong and stable economy will drive demand for housing, especially high-end apartments, office rentals, and high-rise buildings. Conversely, a stagnant and weak economy will negatively affect real estate business activities, building materials production, and construction. Therefore, maintaining Vietnam’s economic growth rate has a strong impact on construction activities and the completion of both industrial and civil projects.
Vietnam has achieved relatively high and stable growth rates over the years, specifically as follows:
Table: Forecast of Vietnam’s Key Economic Indicators
| 2013 | 2014 | 2015e | 2016f | 2017f | 2018f | |
|---|---|---|---|---|---|---|
| Real GDP growth, constant market prices | 5.4 | 6.0 | 6.7 | 6.2 | 6.3 | 6.3 |
| Personal consumption | 5.2 | 6.1 | 9.3 | 7.5 | 7.5 | 7.0 |
| Government spending | 7.3 | 7.0 | 7.0 | 6.9 | 7.0 | 7.2 |
| Gross fixed investment | 5.3 | 9.3 | 9.4 | 8.8 | 8.5 | 7.5 |
| Exports of goods & services | 17.4 | 11.6 | 12.6 | 13.4 | 13.8 | 14.0 |
| Imports of goods & services | 17.3 | 12.8 | 18.1 | 14.8 | 14.7 | 14.3 |
| Real GDP growth, constant factor prices | 5.3 | 5.7 | 6.8 | 6.4 | 6.5 | 6.5 |
| Agriculture | 2.6 | 3.4 | 2.4 | 1.0 | 1.5 | 2.0 |
| Industry | 5.1 | 6.4 | 9.6 | 9.0 | 8.8 | 8.5 |
| Services | 6.7 | 6.2 | 6.3 | 6.4 | 6.3 | 6.3 |
| Inflation (CPI) | 6.6 | 4.1 | 0.6 | 3.5 | 3.8 | 4.0 |
| Current account balance (% GDP) | 5.5 | 4.9 | 0.0 | -0.6 | -0.5 | 0.2 |
| Fiscal balance (% GDP) | -7.4 | -6.2 | -6.5 | -5.9 | -5.7 | -5.5 |
| Debt (% GDP) | 54.5 | 59.6 | 62.5 | 63.8 | 64.4 | 64.7 |
| Net borrowing (% GDP) | -6.1 | -4.5 | -4.5 | -3.8 | -3.5 | -3.0 |
| Poverty rate (USD 1.9/day, PPP)a,b,c | 2.8 | 2.5 | 2.1 | 1.8 | 1.5 | |
| Poverty rate (USD 3.1/day, PPP)a,b,c | 10.7 | 9.5 | 8.4 | 7.5 | 6.6 |
Source: World Bank, Global Economic and Fiscal Management Practices.
Notes: e = estimate, f = forecast.
(a) Based on EAPPOV harmonization, data according to 2014 VHLSS.
(b) Forecast based on normal distribution (2014) with mean = 0.87 using constant PPP per capita GDP.
(c) Actual data: 2014. Values for 2015–2018 are projections.
In addition, according to the Prime Minister’s approval of the housing development orientation to 2020, the average housing floor area per capita must reach 15m² by 2010 and 20m² by 2020, and housing quality must meet national standards. This decision strongly encourages the development of high-rise apartment buildings to quickly expand the housing stock, save land, and create a modern urban lifestyle.
The development of the construction sector depends heavily on economic growth and macroeconomic policies. As a sector that supports overall economic growth, construction depends on factors such as urbanization rate, FDI inflows, lending interest rates, and inflation. At the same time, construction also forms the foundation for the growth of other industries and the economy in general. Therefore, the government always maintains a certain level of disbursement for construction, particularly infrastructure. Besides fiscal policy, monetary policy also directly affects construction. For example, during 2011–2013, tight monetary policy pushed lending interest rates above 20% per year, sharply reducing capital flows into construction investment. Hence, the construction sector’s cycle is strongly affected by the economic cycle, estimated to last about 3–10 years. Moreover, the sector’s growth rate tends to deviate somewhat from GDP growth.
Given these factors, with currently low interest rates, strong disbursement from the government, and FDI inflows, Vietnam’s construction industry is entering a new growth cycle (2015–2018). BMI also forecasted that the growth rate of Vietnam’s construction industry would average 6.3% per year in the coming years.
During 2009–2013, oversupply in the housing market led to high real estate inventories. By the end of 2013, inventory value was estimated at VND 94.5 trillion, but in 2014, thanks to government and business efforts, inventories dropped 21% to VND 77.8 trillion. Therefore, in 2015, the real estate market is expected to recover further, boosting spending on residential construction. In addition, with expectations of major trade agreements to be signed and rising infrastructure needs, the construction industry outlook is considered highly positive in the coming years.
