Tourism surge boosts Vietnam’s economy

According to a report by VinaCapital released on June 24, the number of international tourists visiting Vietnam surged 65 per cent on-year in the first five months of 2024, and is now slightly above pre-Covid levels, even though Chinese visitors remain well below 2019 levels.

Chinese tourists previously accounted for one-third of Vietnam's total foreign tourist arrivals, and China only reclaimed its position as the largest source of visitors to Vietnam last month for the first time since COVID-19.

The ongoing recovery of Chinese tourist arrivals, coupled with the current, extraordinary desire of Americans to travel, means that the total number of foreign tourists visiting Vietnam will likely exceed pre-COVID levels by more than 5 per cent this year.

The report pointed out that foreign tourism accounted for about 8 per cent of Vietnam's GDP, pre-COVID, so Vietnam's continued tourism recovery in 2024 should add over 1 percentage point to the country's GDP growth this year, after boosting GDP growth by more than 4 percentage points last year.

Domestic tourism accounts for an additional 4 per cent of Vietnam’s GDP, but domestic tourism had already fully recovered last year, so increased spending by domestic tourists will not make a major contribution to the country’s GDP growth this year. Taken together, foreign and domestic tourism accounted for about 12 per cent/GDP pre-COVID.

According to VinaCapital, the number of foreign tourists visiting Vietnam jumped by more than 200 per cent last year to nearly 13 million, or from 20 per cent of pre-Covid levels in 2022 to 70 per cent in 2023. That surge directly boosted GDP growth.

"Purchases made by foreign tourists are estimated to account for about 10 per cent of retail sales in Vietnam," Michael Kokalari, chief economist of VinaCapital said. "We observe foreign tourism puts money into the hands of a wide range of local merchants, further boosting the economy, albeit indirectly. We estimate that the total contribution of tourism to Vietnam’s economy - including both the direct and indirect contributions - is over 15 per cent of GDP."

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