Policies for Vietnam to overcome the middle-income trap in the era of economic rise

Since initiating market reforms, Vietnam has experienced impressive growth, elevating it to middle-income country status. However, following the 2009 global financial crisis and the Covid-19 pandemic, the pace of Vietnam’s economic expansion has slowed. There are growing concerns that Vietnam may be at risk of falling into the middle-income trap, including: i) a deceleration in growth and an increasing risk of falling behind; ii) low labor productivity, which is increasingly lagging behind other nations; iii) low Total Factor Productivity (TFP); iv) inefficient use of capital; and v) slow progress in economic restructuring. To avoid the middle-income trap, Vietnam must adopt policies that promote new drivers of growth required in the era of nation’s rise in parallel with the digital era, the era of innovation and creativity. This article explores the general concept of the middle-income trap, examines the specific challenges Vietnam faces, and proposes strategies to help the country overcome current obstacles.