Vietnam is poised for a significant surge in public investment, with expectations for 2025 to be the year of this economic boom. Factors such as decreasing public debt and revised investment laws are setting the stage for growth, especially benefiting construction and building material sectors.
The forecast indicates Vietnam's public debt to GDP ratio has dropped to 37% by the end of 2024 from 55% in 2020, providing ample room for increased public expenditure. Similarly, government debt fell from 50% to 33% during the same period. Comparatively, Vietnam's borrowing levels are significantly lower than regional counterparts like Thailand and Indonesia, where public debts are around 50% of GDP. These positive developments enable the Vietnamese government to allocate more funds toward infrastructure projects, with projections indicating funding could see an 18% increase, equipping the nation with VND 743.33 trillion (approximately 30.9 billion USD) to meet its goals.
According to Mr. Nguyen Tu Lam from DNL Capital, the 2020 disbursement was the strongest during the previous investment cycles, achieving 90% of planned investment for the year. Following this pattern, 2025 could replicate the success with similar or even greater financial mobilization. The updated report by MB Securities (MBS) aligns with these projections, predicting public investment will catalyze growth not only for construction firms but also for companies supplying building materials.
The impact of the revised Law on Public Investment, effective from January 2025, is anticipated to expedite the investment process significantly across various government departments and localities. The reformed laws facilitate private sector participation through Public-Private Partnerships (PPP), enhancing infrastructure development opportunities.
Material availability plays a pivotal role as well, accounting for around 70% of project implementation costs. Essential materials include construction sand (20%), building steel (25%), and asphalt (15%), all projected to see increased demand. Specifically, construction sand and stone demand is expected to grow by 7% as the year progresses, signifying strong recovery and infrastructure demand.
Several industry experts predict the price of building steel will see upward pressure. Reduced production from China is expected to ease supply challenges, with steel prices poised to rise approximately 7%. Companies heavily invested in steel production, such as Hoa Phat (HPG), are expected to capitalize significantly from these trends.
The asphalt sector could experience remarkable expansion, with compound annual growth projections of 8% from 2025 to 2030, driven by infrastructure initiatives aimed at completing 5,000km of expressways. This development means companies like the Petrolimex Group, known for asphalt and petrochemical products, will find substantial growth opportunities lined up.
With infrastructure development accelerating, the cement industry should also revive strongly, particularly due to enhanced transportation project speeds. The supply of cement is likely to be stimulated through proposed reductions of export taxes leading to increased consumption levels. MBS promotes Vicem Hà Tiên Cement Co., noted for its dominant market share and broad distribution network, as likely to benefit from this return to form.
On another front, the impending imposition of import tariffs on aluminum and steel, due to be enacted March 12, 2025, may significantly affect Vietnam's export sectors. The United States accounted for about 25.4% of Vietnam's aluminum exports, with approximately USD 479 million worth projected for 2024. Under the new tariff regime, aluminum exports will incur a 25% tax, significantly impacting market dynamics.
Industry analysts are projecting adverse effects for Vietnamese companies due to heightened tariffs, irrespective of their previous experiences under existing import duties which had imposed similar pressures. The steel sector may benefit from the homogenization of import tariffs as the market becomes more competitive across various regions. The Metal Exporters Association forecasts steely competition within export markets such as ASEAN, the EU, and the US, where new investigations for anti-dumping duties threaten Vietnam's steel exports.
For the steel sector, the US Department of Commerce's September 2024 decision to investigate anti-dumping duties on corrosion-resistant steel imported from Vietnam underlines the need for vigilance among manufacturers. Preliminary findings expected by April 2025 could have lasting effects on companies engaged heavily within those export lines.
Domestically, protective measures stirred by concerns surrounding increased Chinese steel exports may offer additional avenues to guarantee local manufacturers remain competitive. The Ministry of Industry and Trade's anti-dumping actions, especially concerning imports from China, affirm the government's commitment to safeguarding the local industry against international competition.
With rising exporting pressure and incoming tariffs, local companies must analyze supply chains to remain competitive. Experts recommend comprehensive approaches to boost local sourcing and maintain transparency about material origins to build consumer trust and support through compliance with legal mandates.
This comprehensive outlook reveals 2025 to not only be a pivotal year for public investment but also presents complex challenges for Vietnam’s burgeoning construction and material industries through both domestic and international dynamics. Indeed, it will require nimbleness and strategic foresight to navigate the intricacies of this rapidly changing economic environment.