Challenges and Strategies for Viet Nam in Escaping the Middle-Income Trap

Viet Nam has reached upper-middle-income status in 2025 and has set its sights on high-income status by 2045. To achieve this goal, it must sustain, on average, a per-capita growth rate of at least 7 percent a year for two decades, something most middle-income economies have never succeeded in doing. In this paper, we analyze what may stand in Viet Nam's way, via five channels: demography and labor, industrialization, infrastructure, institutions, and technology. Benchmarking Viet Nam against the East Asian economies that graduated to high income, and against Southeast Asian peers of comparable size, we find that each constraint binds earlier in Viet Nam's income trajectory than it did for any successful graduate. The demographic window is closing at a lower income level; manufacturing has plateaued, with low domestic value added in exports remaining a chronic problem; infrastructure quality and institutional capacity remain short of what higher-value production requires; and the country is currently underutilizing the human capital it builds. Against this diagnostic, we assess the government's 2024--2026 reform program and recommend where it needs to go further: industrial and infrastructure deepening, labor formalization, technology absorption and institutional and competition reform.