Unlocking Prosperity: How Vietnam Can Become a High-Income Country by 2045

The World Bank’s 2025 flagship report “Vietnam Rising: Pathways to a High-Income Future”, prepared in close collaboration with Australian Aid and supported by research from institutions including the General Statistics Office of Vietnam, the Ministry of Planning and Investment, and the Ministry of Finance, charts an ambitious but attainable path for Vietnam to become a high-income country (HIC) by 2045. Achieving this would require a significant acceleration in economic growth, raising the current average of 5.1 percent annual per capita GDP growth to 6.0 percent over the next two decades. To do this, Vietnam must move beyond its traditional model of capital-heavy, low-cost manufacturing and toward a more resilient, equitable, and innovation-driven economy. The report offers a deep diagnosis of the country’s current constraints and sets forth five integrated policy packages as a roadmap to achieving its vision.

Aging, Investment Fatigue, and a Labor Shift

Vietnam’s earlier success was driven largely by rapid capital accumulation and a booming, youthful labor force. However, both engines are now slowing. Gross capital formation, which once peaked at 37 percent of GDP in the 2000s, has stagnated at around 32 percent, with infrastructure gaps, especially in energy, transport, and digital networks, becoming increasingly apparent. Meanwhile, the demographic tide is turning. The share of the population aged 65 and over is projected to nearly triple by 2049, accounting for 18 percent of all citizens. With this rapid aging comes a shrinking labor force and mounting care responsibilities, disproportionately affecting women and threatening to reduce female labor participation unless formal child and elder care systems are established.

Notably, Vietnam’s demographic transition is occurring at a much lower income level compared to peers like South Korea or Japan, meaning the country has fewer fiscal and technical resources to respond. As older citizens retire and stop contributing income tax, public revenues are expected to fall while spending needs, on healthcare, pensions, and infrastructure, will rise. Reforms in pension systems, elderly care, and flexible work arrangements for older workers are urgently needed to offset these dynamics.

The Productivity Conundrum: Trapped in Low-Value Work

Perhaps the most critical challenge outlined in the report is Vietnam’s sluggish productivity growth, which averaged just 0.9 percent annually over the last decade. To reach HIC status by 2045, productivity will need to at least double. While countries like South Korea and Singapore achieved rapid advances through innovation and technology upgrades, Vietnam remains stuck in a low-value-added export model. Over 90 percent of manufacturing jobs are still low-skilled, with domestic firms four times less productive than foreign firms operating in the same sectors.

This gap is compounded by weak technological diffusion and declining participation in global value chains (GVCs). While Vietnam’s exports have soared, the value-added per capita remains low, just 39 percent of Thailand’s and 52 percent of Mexico’s. Education and training systems have not kept pace. A large share of graduates, particularly from vocational and technical programs, are underemployed, with younger workers often accepting jobs below their skill level. Firms increasingly cite the shortage of skilled labor as a major constraint to expansion, especially in tech-intensive industries.

External Shocks and the Climate Threat

Geoeconomic fragmentation, climate change, and disruptive technology trends are reshaping Vietnam’s development environment. Tensions between global powers and the slowdown of offshoring have affected trade flows, even as Vietnam has benefited from firms diversifying away from China. Yet, this makes the economy more vulnerable to external shocks, especially since many of its exports to the U.S. include Chinese inputs.

Climate change poses a particularly grave threat. Vietnam is among the most climate-vulnerable nations in the world, with its coastal cities and low-lying deltas exposed to floods, storms, and rising sea levels. Without urgent action, climate impacts could shrink GDP by up to 11 percent by 2045. At the same time, Vietnam’s economy remains highly carbon-intensive. Coal still accounts for a third of its energy mix, and export-related emissions are the highest among middle-income peers. Transitioning to greener, cheaper energy sources, such as wind and solar, is essential for both climate resilience and long-term competitiveness.

Five Policy Packages for a Future-Ready Vietnam

To confront these overlapping challenges, the report outlines five mutually reinforcing policy packages. The first centers on supporting private sector development by streamlining business licensing, promoting innovation, and strengthening links between domestic and foreign-invested firms. The second emphasizes investing in resilient infrastructure, especially in power, transport, and digital networks, while improving climate adaptation and mobilizing long-term financing through capital market reforms.

The third package focuses on building skills, participation, and resilience in the labor market. This includes revamping tertiary education and vocational training, enabling lifelong learning, and modernizing social protection. The fourth ensures that everyone gains from the transition, calling for equitable access to tertiary education, expanded childcare and eldercare services, and policies targeting rural and ethnic minority populations. The final package targets institutional modernization, a critical foundation for all reforms, by improving lawmaking processes, strengthening public investment management, and fostering transparency and accountability.

Vietnam must act swiftly and decisively. Without reforms, it risks falling short of its 2045 goals. But if this agenda is implemented in full, the country has a once-in-a-generation opportunity to leapfrog into a future of inclusive, innovation-led prosperity.