Vietnam’s Middle Class: Size, Spending Patterns, and Business Opportunities

Vietnam is on a trajectory to achieve upper-middle-income status by 2030 and aims for high-income country status by 2050. The middle class in Vietnam, currently at 13% of the population (around 13 million people) in 2023, is projected to grow to 26% by 2026. This expansion presents a wealth of opportunities for businesses.

Economic Trajectory

Vietnam’s role in the global supply chain has significantly boosted its economic growth, primarily through a robust manufacturing sector and growing exports. From 2012 to 2022, Vietnam's exports grew at an annual average rate of 12%, surpassing the global average. In the first half of 2024, export turnover reached US$190.08 billion, a 14.5% year-on-year increase. Major corporations like Samsung, Google, Microsoft, Apple, Nike, and Adidas have integrated Vietnam into their supply chains, adopting strategies such as “China plus one.”

Foreign direct investment (FDI) surged to US$11.07 billion in the first five months of 2024, up 2% from the same period in 2023. The manufacturing and processing sectors led capital investments with over US$7.43 billion, reflecting an 11.9% year-on-year growth. Infrastructure investments, which constitute about 6% of Vietnam’s GDP, coupled with numerous free trade agreements, have enhanced the country’s manufacturing and trade environment.

Since 1986, Vietnam’s economic reforms have driven trade liberalization, private enterprise growth, and increased foreign investments. The ‘Đổi Mới’ reform policy transformed Vietnam from one of the poorest nations into a lower-middle-income country. In September 2023, Vietnam’s partnership with the United States underscored its growing global economic influence.

From 2002 to 2022, Vietnam’s GDP per capita rose 3.6 times to US$4179, and the poverty rate fell from 14% in 2010 to 5.7% in 2023. According to the World Bank, Vietnam’s per capita income reached US$4,346.8 in 2023. The country's master plan for 2021-2030 aims for an average annual GDP growth rate of 7%, targeting a GDP per capita of approximately US$7,500 by 2030, with goals for low carbon emissions and achieving “net zero” emissions by 2050.

Characteristics of Vietnam’s Middle Class

Defining the middle class in Vietnam is challenging due to varying income thresholds. The World Data Lab typically defines it as individuals with daily expenses exceeding US$12. In Q1 2024, the average monthly salary for paid workers was approximately VND 8.5 million (US$334.42). The labor force in 2023 consisted of around 52.4 million people.

With a median age of around 35, the middle class is youthful, tech-savvy, and better educated, predominantly concentrated in urban areas like Hanoi and Ho Chi Minh City. This group drives demand for goods and services and places a high priority on education, healthcare, and housing. They also value leisure, travel, and personal development.

Implications of a Growing Middle Class

Vietnam’s middle class is expanding due to rapid economic growth, industrialization, and increasing wealth. The economy's impressive growth rate over the past decade has created job opportunities and increased disposable incomes, improving living standards.

The middle class is significantly impacting Vietnam’s economy and society by driving demand for goods and services and investing in education and real estate. They are gaining political and social influence, contributing to national development and stability, and playing a crucial role in international trade and investment.

Spending Patterns

Several trends are fueling the growth of Vietnam’s middle class. Urbanization is creating opportunities in services and manufacturing sectors, while rising disposable incomes lead to more spending on education, healthcare, and entertainment. The middle class is becoming more discerning, driving demand for high-quality goods and foreign brands. E-commerce is growing rapidly, supported by widespread internet and mobile device usage, boosting the retail sector.

Consumers are prioritizing durable goods and experiences such as travel and entertainment. Post-pandemic, there is a noticeable shift towards spending on non-essential goods.

Consumer Trends and Business Takeaways

Businesses need to align their offerings with the digital presence of consumers, catering to value-for-money needs through a diverse product range and new retail formats. E-commerce platforms are crucial for reaching a wider audience.

To attract affluent consumers, especially younger generations, businesses should focus on premium offerings and innovation. Companies should consider expanding into tier-2 and tier-3 cities and adapt their market strategies to navigate the fragmented retail landscape. Sustainability is also a key trend, with consumers willing to invest in organic, healthier products.

In Vietnam, spending on food and beverages, health products, and high-end items is increasing. This shift presents opportunities for businesses to cater to the evolving preferences of the middle class.

Conclusion

Vietnam’s goal to achieve developed economy status by 2050 is driving significant changes. The growing middle class is altering spending patterns and creating vast opportunities for businesses. Companies looking to succeed in this market should focus on offering high-quality products and services that meet the changing demands of this dynamic demographic.