UOB lifts Vietnam growth outlook to 7.5 per cent for 2026

UOB lifts Vietnam growth outlook to 7.5 per cent for 2026

Vietnam has entered 2026 with solid economic momentum, supported by strong growth last year and a more upbeat outlook from regional economists.

Source: UOB

The economy expanded by 8 per cent in 2025 despite pressure from US tariffs, prompting UOB to raise its 2026 growth forecast to 7.5 per cent from 7 per cent, according to a report released on January 9. UOB said Vietnam’s performance last year underscored its resilience and provided a firm foundation heading into 2026.

"We have raised our 2026 growth forecast to 7.5 per cent, reflecting resilience and momentum," UOB noted, while warning that a high comparison base, the possible unwinding of export front-loading, and ongoing uncertainty over US tariff policy could weigh on the growth trajectory.

Data released by the Statistics Office on January 5 shows that Vietnam's real GDP growth surged a further 8.46 per cent in the last quarter of 2025, from 8.25 per cent on-year performance in the third quarter, supported by robust export and production despite US tariffs.

The outcome exceeds Bloomberg's est of 7.7 per cent and UOB's forecast of 7.2 per cent, marking the strongest quarterly performance since 2009 (excluding COVID-19 distortions). For 2025 as a whole, Vietnam's economy expanded 8 per cent, above UOB's calls of 7.7 per cent but falling short of 8.3-8.5 per cent, which would have required an extraordinary 9.7-10.5 per cent in the fourth quarter.

UOB said that Vietnam's outsized performance in the fourth quarter was again driven by exports, which surged 19 per cent on-year during the quarter, extending the 18.2 per cent gain in the third quarter, despite tariff headwinds. Total exports in 2025 rose about 17 per cent to a record high of $473 billion from just about $400 billion in 2024, although the 19 per cent increase in imports reduced the full-year trade surplus to $19 billion ($24 billion in 2024).

Manufacturing production saw a broad-based increase in the same period, increasing 11.3 per cent on-year in the fourth quarter, a faster pace compared to the 10 per cent rise in the same period of 2024. In 2025, manufacturing output jumped by 10.5 per cent, extending the 9.5 per cent increase in 2024 and registering its best annual performance since 2018.

Other data during the quarter continued to defy worries of the US tariffs' impact. Foreign investor confidence remains intact, with renewed investments (or registered capital) rising 0.5 per cent to $38.4 billion in 2025. Actual, or realised, inflows of foreign direct investment (FDI) surged by 9 per cent to a record of $27.6 billion, from the previous record of $25.4 billion in 2024 as foreign investors accelerated their investment plans as global supply chain shifts took further root in Vietnam.

"It should be noted that the actual or realised FDI figures reported by the Statistics Office differ from the commonly referenced UNCTAD series due to differences in methodologies and classifications," the UOB report highlights. For example, actual FDI for Vietnam in 2024 was reported by UNCTAD at a record high of $20.2 billion (compared to $25.4 billion by the Statistics Office). Still, the latest release suggests that UNCTAD-defined FDI for Vietnam is likely to come in at another record high of around $22-24 billion in 2025 when actual data becomes available around June this year.

Concurrent with the robust business and trade activities, visitors inflows to Vietnam increased by 20 per cent to hit a high record of 21.17 million in 2025, beating the previous record of 18 million in 2019. Visitors from China dominate the chart, contributing to a 25 per cent share of the arrivals (but still short of the 32 per cent share in 2019), followed by South Korea (20.5 per cent), Taiwan (5.8 per cent) cent), the US (4 per cent), and Japan (3.8 per cent).

However, UOB cautioned that Vietnam remains highly exposed to trade frictions such as US tariffs, given the open structure of its economy. Exports of goods and services account for about 83 per cent of GDP – the second-highest ratio in ASEAN after Singapore – alongside Vietnam’s heavy reliance on the US market.

The US absorbed around 30 per cent of Vietnam’s total exports, valued at $406 billion in 2024, making it the country’s largest export destination, followed by China with 15 per cent and South Korea with 6 per cent. Key exports to the US included electrical products ($41.7 billion), mobile phones and related items ($28.8 billion), furniture ($13.2 billion), footwear ($8.8 billion), knitted apparel ($8.2 billion), and non-knitted apparel ($6.6 billion). Together, these categories accounted for nearly 80 per cent of shipments to the US last year.

“While Vietnam’s trade activity has remained resilient so far despite US tariffs, export orders could begin to soften once front-loading eases and higher prices weigh on US consumer demand, particularly in 2026,” UOB said.

Despite strong growth in 2025 and expectations of another solid year in 2026, UOB said policy easing room at the State Bank of Vietnam (SBV) remains limited. Inflation pressures persist, with average headline inflation at 3.2 per cent and core inflation at 3.3 per cent in 2025, compared with 3.6 per cent and 2.9 per cent, respectively, a year earlier. Healthcare and education costs were the main contributors to inflation, although price pressures have shown signs of stabilising.

Foreign exchange dynamics are another constraint. The VND was the third-weakest currency in Asia in 2025, depreciating 3.1 per cent against the US dollar, behind the Indian rupee’s 4.8 per cent and Indonesia’s rupiah’s 3.5 per cent declines. This contrasted with gains elsewhere in the region, supported by broad US dollar weakness, ranging from a 10 per cent rise in Malaysia’s ringgit to a 0.3 per cent gain in the Japanese yen.

“Given these factors, we expect the SBV to keep its refinance rate unchanged at 4.5 per cent through 2026,” UOB said.

VIR