Vietnam’s Demographic Challenges Demand Urgent Policy Reforms to Avoid Economic Stagnation

Vietnam is experiencing one of the fastest demographic aging processes globally, transitioning at a development stage that limits its adaptability compared to regional peers.

Vietnam’s total fertility rate (TFR) declined from 2.11 children per woman in 2021 to 1.91 in 2024, marking three consecutive years below the replacement level of 2.1. The decline is most pronounced in economically active regions, with Ho Chi Minh City reporting a rate between 1.32 and 1.39 in 2024.

Across the country, the number of provinces with below-replacement fertility surged from 22 in 2019 to 32 in 2024, concentrated in the southeastern provinces (1.48) and the Mekong Delta (1.62).

According to the UNFPA, Vietnam is projected to transition from an “aging” to an “aged” society by 2036, a process taking roughly 25 years—comparable to Japan and significantly faster than France’s 115-year duration.

With GDP per capita at approximately US$5,000, a 2021 World Bank and JICA report warned Vietnam risks “getting old before getting rich,” undergoing its demographic transition “at an earlier stage of economic development and a lower per capita income than other countries experiencing a similar shift.”

Japan and South Korea achieved comparable fertility rates while operating as high-income economies with mature welfare systems. Vietnam lacks this buffer, resulting in a narrower adaptation window.

What the law introduces

The Population Law, enacted in 2026, marks the elevation of the 2003 Population Ordinance to full legislative status, requiring National Assembly approval and reflecting heightened political commitment.

Its provisions fall into three categories: leave policies, financial support, and infrastructure development. Women receiving a second child now qualify for seven months of maternity leave, up from six, while fathers receive 10 working days of paternity leave.

Eligible mothers can claim a one-off payment of at least 2 million dong (approximately US$77), with increased amounts for women having two children before 35, those from ethnic minority groups, and residents of provinces with below-replacement fertility. Families with two or more children receive priority access to social housing.

Prenatal and newborn screening packages are subsidized for disadvantaged households, with universal coverage planned from January 2027. The Ministry of Health aims to raise the TFR by 2% annually to restore replacement level by 2030.

From control to development

The shift is stark compared to the policy it replaces. Vietnam’s two-child policy, introduced in 1988 during Doi Moi reforms, was enforced through dual mechanisms.

Administrative penalties for the general population were abolished in late 2013, alongside China’s relaxation of its one-child policy. However, Communist Party members faced stricter rules: a third child resulted in reprimands, a fourth could lead to removal from leadership, and a fifth triggered expulsion.

These provisions were softened in 2022 and fully abolished in March 2025, over a decade after administrative penalties ended for ordinary citizens. China’s trajectory followed a similar path, beginning relaxation in 2013 and eliminating all penalties by 2021.

Vietnam’s party disciplinary measures were the last to fall, suggesting the policy served broader governance functions beyond its demographic purpose.

The Population Law’s acceleration under General Secretary To Lam, from Politburo directive to implementation in under 18 months, aligns with his emphasis on quantifiable governance benchmarks.

In May 2026, Lam proposed piloting “socialist commune and ward” models in Hanoi, interpreted as an effort to frame socialism through measurable KPIs.

This urgency stems from Vietnam’s compressed timeline: aiming for high-income status by 2045, a decade before the aged-society threshold in 2036. The demographic dividend propelling growth risks disappearing before economic goals are met.

Regional comparison and outlook

Vietnam’s initial package is modest by regional standards, with the maximum cash bonus equivalent to roughly $228—two-thirds of the average monthly salary.

South Korea offers birth grants exceeding $1,400 with monthly allowances, while Japan provides a universal childbirth grant of $3,200 per child. Singapore’s baby bonus scales to $8,500 for the first two children and $13,000 for additional ones, yet results remain limited.

South Korea’s TFR dropped to 0.72 in 2023 despite increased pronatalist spending. Japan’s interventions stabilized its rate without reversing decline. Structural constraints—housing costs, childcare availability, and female workforce opportunity costs—resist financial incentives across the region.

Vietnam faces similar pressures in developed regions, where raising a child to age 22 costs $380–$760 monthly, exceeding average incomes. UNFPA notes continuous support through child-rearing is often necessary to influence decisions.

The law’s framework, designed through 2035, will require substantial expansion to address these barriers. Ho Chi Minh City’s TFR over the next 2–3 years will signal progress.

Flat rates would confirm structural constraints—not the two-child limit—drive declines, necessitating policy adjustments beyond cash incentives. Vietnam’s compressed timeline risks leaving welfare and childcare infrastructure incomplete when the 2036 aged-society threshold arrives, undermining growth targets.

The law establishes institutional foundations, but insufficient investment in its full scope threatens economic stability. Future budgetary cycles must substantially expand support to avert demographic decline overwhelming growth ambitions.

Lam Duc Vu is a risk analyst writing on Indo-Pacific security and regional affairs.

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