Vietnam's fertility rate has dropped to a record low of 1.91 children per woman in 2024, marking the third consecutive year below the replacement level of 2.1. This decline occurs even as the country's economy continues to thrive, with a GDP growth of 7% last year.
The current population of Vietnam is approximately 100 million. According to the Deputy Director of the Population Authority of the Ministry of Health, Pham Vu Hoang, the population is projected to start decreasing by mid-century. Urban centers, particularly Ho Chi Minh City, have already begun to feel the effects, with fertility rates falling from 1.39 in 2022 to 1.32 in 2023.
In response to the declining birth rate, the city council has implemented measures to encourage higher fertility rates, including financial assistance for women under 35 who have two children and small allowances for low-income families for prenatal care. Plans aim to increase the fertility rate to 1.6 by 2030.
A recent report by Ipsos, titled 'Generation Myths & Realities 2024', emphasizes the economic implications of the looming population crisis, presenting both challenges and opportunities for industries and businesses.
Despite foreign investment in Vietnam declining by 3% year-on-year to $38 billion, the country remains an attractive destination for Western investors seeking to diversify from China. Experts suggest that the Vietnamese government must address key issues in economic reform to continue attracting investment.
Demographics are part of the equation, but other factors, such as Vietnam's strong economic growth and its integration into trade agreements, also play a significant role in its appeal to investors.
Vietnam's economy ranks as the 32nd largest globally. However, children now make up only about one-fifth of the population, with the percentage of those aged 15-64 projected to decline to 63% by 2050.
Experts warn that a shrinking workforce will reduce productivity and slow economic growth, while an aging population will strain national resources. A World Bank study in 2022 projected that Vietnam's pension expenditure could rise from 2% of GDP to 5.6% by 2080.
The International Monetary Fund (IMF) previously cautioned that Vietnam risks becoming 'old before it becomes rich'. The government is currently drafting population legislation to be presented to the National Assembly, which may include measures to encourage births and potentially lift penalties for families with more than two children.
Chris Humphrey, Executive Director of the European Business Council for ASEAN, noted that European companies are not currently deterred from investing in Vietnam due to demographic issues, but he anticipates that the government will need to take proactive measures in areas such as pension planning and healthcare systems to address future challenges.