Mariam J. Sherman is the World Bank Division Director for Vietnam, Cambodia and Lao PDR. — Photo courtesy of WB

Việt Nam’s move into the upper-middle-income category marks an important milestone in the country’s development journey. Mariam J. Sherman, World Bank Division Director for Việt Nam, Cambodia and Lao PDR, speaks to Việt Nam News reporter Mai Hương about what this achievement means, the challenges ahead and the reforms needed for Việt Nam to realise its ambition of becoming a high-income economy by 2045.

What does the income reclassfication mean and why it matters?

This year, Việt Nam is one of six economies worldwide to move into a higher income category, reaching upper-middle-income status 17 years after entering the lower-middle-income group in 2009. This important milestone in the country’s development trajectory reflects the remarkable transformation Việt Nam has achieved through decades of sustained reforms, strong economic growth and rising living standards.

Over the past years, Việt Nam has consistently been one of the fastest-growing economies in the region, supported by resilient foreign investment, surging exports and growing domestic services. This milestone can further help reinforce international confidence in Việt Nam's long-term economic prospects and the country’s position as a destination for investment.

At the same time, the significance of this upgrade goes beyond the classification itself. As countries develop, the nature of their growth challenges also changes. While the drivers that helped Việt Nam reach upper-middle-income status remain important, sustaining future growth will increasingly depend on productivity, innovation, stronger domestic enterprises and the ability to generate greater value across the economy.

The next chapter will be defined not only by how fast Việt Nam grows but also by the quality of that growth, which will be central to its journey towards becoming a high-income economy by 2045.

How can Việt Nam sustain growth and avoid the middle-income trap?

The journey ahead remains significant. Based on this year’s thresholds, Việt Nam’s GNI per capita would need to nearly triple to reach high-income status. Since 1990, only 27 economies have made the transition from middle- to high-income status, with more than a third benefiting from unique circumstances such as European Union accession or significant natural resource wealth.

However, Việt Nam already has many of the essential ingredients in place, including a young and talented workforce, macroeconomic stability, a strategic location at the heart of Asia’s growth region and, perhaps most importantly, a strong ambition and willingness to reform and adapt. These are advantages that many countries do not have.

Turning the 2045 vision into reality will require addressing several important challenges, including the growing divergence between foreign-invested and domestic firms. While foreign investment has been a powerful driver of Việt Nam’s success, the next stage of development will depend on strengthening domestic enterprises, particularly SMEs, so they can innovate, grow and create more quality jobs and participate more deeply in global value chains.

As one of the world’s most open economies, Việt Nam will also need to maintain resilience to external shocks while continuing to diversify its drivers of growth amid increasing global uncertainty.

Public investment is becoming one of the key levers for growth, with planned volume for the 2026-30 period nearly triple that of the previous five years. However, it needs to move from faster disbursement to higher impact through better project selection, stronger preparation, more efficient procurement and mechanisms to de-risk and crowd-in private investment.

Infrastructure will play a central role in the next stage of development. While the Government’s ambitious public investment programme can help address critical bottlenecks, public resources alone will not be sufficient to meet Việt Nam’s long-term infrastructure ambitions. The World Bank Group is working with the Government to rethink infrastructure financing and mobilise private capital through well-prepared, bankable projects.

Long-term growth will also require deeper and more diversified sources of finance beyond the banking system. Continued capital market reforms can help ensure that capital and bank credit flow to the most productive and dynamic firms, including smaller enterprises with the potential to grow. Building on the recent FTSE Russell upgrade, further reforms can strengthen Việt Nam’s capital markets, broaden the investor base and reinforce the country’s position in global financial markets.

At the same time, capable firms need capable people. As Việt Nam moves towards high-income status, continued investment in innovation, skills development and technology adoption will be essential to help businesses move up the value chain and create better jobs.

However, regulatory reforms alone are not enough, as sustainable growth requires a systemic commitment from every level of government, institution and stakeholder towards the same goal.

What are the main implications for financing, investment and the WB partnership?

Việt Nam’s reclassification to upper-middle-income status creates new opportunities to deepen the country’s partnership with the World Bank Group, investors and the broader development community.

As Việt Nam enters a new stage of development, its challenges are becoming more sophisticated, requiring financing and investment that match the scale and complexity of the next phase. Alongside competitive, long-term financing, the World Bank brings global knowledge, technical expertise and experience from countries that have successfully navigated similar transitions (such as Poland and the Republic of Korea), while adapting those lessons to Việt Nam’s context.

The World Bank is also working with the Government on the next Country Partnership Framework, focusing on policy advice, technical support and investments that reflect Việt Nam’s evolving priorities and long-term development ambitions. — VNS