Vietnam (Socialist Republic of)

More sluggish growth in 2026

Economic growth remained strong in 2025 and posted a minor uptick compared to 2024. The export boom (90% of GDP in 2024) was the main source of momentum, despite the introduction by the US – the country's largest export market accounting for 30% of exports – of new tariffs. A provisional rate of 10% was imposed from April 2025 before being raised to 20% in August. The latter levy is the result of a formal agreement signed in October, which significantly lowered the 46% tariff initially announced on Liberation Day. A 40% duty will also be applied to products re-exported from third countries by Vietnam that do not meet US-defined criteria. The strength of exports was mainly based on computers and electronic components, some of which are exempt from tariff increases. Vietnam has a somewhat similar economic structure and political system as China but benefits from lower tariffs than its neighbour and, as such, continued to take advantage of China-US trade tensions. On the services side, the arrival of international tourists, mainly from China (24%) and South Korea (19%), continued to grow rapidly in 2025, exceeding its 2019 level by 18%. Contrasting with the dynamic trend, household consumption remained moderate and kept a similar pace to that of 2024 and below pre-pandemic levels. However, the minor easing of inflation suggests that consumption volumes will increase slightly.

Exports are expected to remain the primary source of growth in 2026, although the pace of their contribution could weaken on back of a normalisation trend following sharp increases in 2024 and 2025. Exports will continue to fuel manufacturing output, which is dominated by electronics, clothing and footwear. Output may still benefit from supply chain restructuring. While increased US monitoring of re-exports is likely to encourage foreign direct investment (FDI) flows, uncertainty surrounding ongoing discussions on the very definition of re-exports could damp investor enthusiasm. These investment flows mainly come from Singapore, China and Hong Kong. Foreign-owned companies are essential to the Vietnamese economy. They account for around 70% of the country's exports and posted a 9% increase in 2025. At the same time, Vietnamese tourism could continue to grow rapidly amid tensions between Thailand and Cambodia. Furthermore, diplomatic tensions between China and Japan are likely to curb Chinese tourist travel to the latter, which could enhance tourist footfall in Vietnam.

An extension of the disinflation trend, lower underemployment and a prolongation of the reduced VAT rate from 10% to 8% until the end of 2026 should support private consumption. The National Assembly's decision to expand healthcare rights and reduce medical costs for the population under a programme running from 2026 to 2035 could also further boost consumption. After lowering its key interest rate several times in 2023 to support economic activity, the State Bank of Vietnam (SBV) maintained the status quo with a benchmark interest rate of 4.5%. Nevertheless, monetary policy was loosened in 2025. The SBV raised its bank credit growth target. Total outstanding loans grew by 17% in the first eleven months of 2025 (compared with 11% over the same period in 2024). A reduction in the reserve requirement ratio for a number of banks from 1 October may have contributed to the increase. In 2026, although downward pressure may ease on back of falling US interest rates and the fact that inflation is forecast to remain below the 4.5% target, the large volume of non-performing loans – 5.3% of total loans in March 2025 – will limit the scope for significant monetary easing.

International reserves set to stay low

The public deficit widened significantly in 2025. Expenditure, which focused on investment (+30% over the first eleven months of 2025), grew faster (+19%) than revenue (+17%). In 2026, the deficit is expected to continue to widen, but only slightly. Expenditure is once again expected to focus on investment. Infrastructure spending is forecast to increase significantly, with priority given to transport, energy and digitisation. However, implementation could be hampered by delays in land release and slow approval procedures. In the first eleven months of 2025, public investment spending reached only 63% of the annual plan. Public debt, more than two-thirds of which is domestic, will remain low. It consists almost exclusively of medium- and long-term maturities and is largely denominated in local currency. The main source of vulnerability stems from contingent liabilities, particularly those related to under-performing state-owned enterprises and a fragile banking system.

On the external accounts side, the current account surplus is expected to continue to narrow in line with the decline in the goods balance surplus (9.4% of GDP in 2024) as import growth slows at a weaker pace than export growth, with the latter decelerating after surging in 2024-2025. Imports will remain buoyant thanks to strong investment that is increasing demand for capital goods and inputs. In addition, the primary income deficit (3.4%) fuelled by the repatriation of profits made by foreign companies operating in Vietnam could widen. A narrower current account surplus will weigh on low foreign exchange reserves, which were estimated at 2.2 months of imports in September 2025.

In the firing line over China-US tensions

Tô Lâm has led the Vietnamese Communist Party since the death of the previous General Secretary, Nguyen Phu Trong, in July 2024. Since taking over as party leader, he has launched a new national development strategy based on four pillars: science and technology, international integration, the rule of law and private sector-led growth. General Luong Cuong, who is a member of the armed forces, succeeded him as President after his appointment by the National Assembly in October 2024. The 14th Party Congress, held every five years, will take place in January 2026. Congress delegates—representing Party organisations in the provinces, ministries and the military—will elect some 200 members to the Central Committee for the 2026-2030 term. The latter will then appoint the members of the Politburo, which brings together the country's four main leaders: the Party Secretary General, the Prime Minister, the President of the State, and the President of the National Assembly. Political continuity is widely anticipated. At the end of 2025, the draft political report, a strategic plan for development, was submitted for public consultation as a key document to be presented to the Congress. It reiterates the need to establish a new growth model defined by four pillars and sets a 10% average annual GDP growth target.

Vietnam was particularly active on the diplomatic stage in 2024. It forged closer ties with several Asian nations (Japan, the Philippines and Malaysia) notably for security, and consolidated its links with the US under a strategic partnership framework. However, relations with the new US administration were marred the following year by the introduction of some of the highest “reciprocal” US tariffs that were justified by the wide US trade deficit with Vietnam and US claims that Vietnam was re-exporting Chinese products. Against the backdrop of Sino-US tensions and an all-out US tariff offensive, it is becoming more difficult for Vietnam to maintain its balancing act between the US and China. During Xi Jinping’s visit in April 2025, 45 agreements were signed to strengthen bilateral economic relations. Despite a territorial dispute in the South China Sea, Beijing is a major trade partner and accounted for 38% of imports and 15% of exports in 2024. In a bid to continue strengthening its presence on the international diplomatic stage, Vietnam enhanced ties with five countries –Indonesia, New Zealand, the UK, Singapore and Thailand – to the level of strategic partnerships in 2025. Vietnam's presence on the diplomatic stage was also underscored by its role as host to the United Nations Convention on Cybercrime (the Hanoi Convention) in October 2025.

Last updated: January 2026