Real GDP growth is projected to remain robust at 6.5% in 2025 and 2026. Private consumption will benefit from steady increases in real wages and employment. Investment will be supported by ongoing inflows of foreign direct investment and planned increases in public investment. Improved global demand and tourist arrivals will bolster export growth, although geopolitical tensions may raise logistics and intermediate input costs, potentially weighing on exports. Headline consumer price inflation will ease to 3.5% in 2026, helped by some easing in growth in 2025.

The monetary policy rate is expected to maintain its current level, but the overall policy stance should be made more restrictive through adjustments in credit targets for individual banks. Fiscal policy is expected to be slightly expansionary, with public investment now accelerating, after having fallen behind expectations earlier in 2024. Productivity could be strengthened by enhancing education and training to address a shortage of skilled workers, and by fostering closer links between multinational enterprises and the domestic economy while improving the efficiency of financial markets in allocating capital to its most productive use.

GDP increased by 6.8% in the first nine months of 2024 compared with the same period in 2023. Final consumption and especially gross capital formation drove this strong growth. Industrial production has been rising steadily since the beginning of 2024. Unemployment reached 2.2% in September, its lowest level since peaking at 4.0% in September 2021. Headline inflation rose from 3.4% in January 2024 to 4.4% each month between April and July, but has since declined to 2.9% in October, while core inflation has been declining since May 2023. However, a rise in non-performing loans and the failure of a major bank raise concerns about the financial system.

Exports of goods and services contributed to the robust real GDP growth in the first nine months of 2024, increasing by 16.9% in real terms, while imports grew by 17.1%. The value of goods exports to the United States, which accounts for about 30% of the total exports, rose by 25.5% during the same period, while those to China, Viet Nam’s second biggest export destination, grew only by 2.9%.

Using both interest rate cuts and direct credit growth targets for banks, the central bank has maintained its accommodative monetary policy stance despite a bout of headline inflation in the first half of 2024. Seeing through these inflationary pressures from volatile items has paid off, but the central bank should nonetheless remain vigilant to potential upside risks from international oil prices and supply chain disruptions. The policy stance should become more restrictive, which would imply more moderate credit growth targets for banks, while shifting to a more price-based monetary policy framework in the medium run. Fiscal policy will continue to support economic activity, as appropriate given strong investment needs. After having fallen short of policy plans, the recent acceleration of public investment is expected to continue in 2025. Public-sector wage increases will provide further support to growth.

Growth is projected to remain solid at 6.5% in 2025 and 2026. Robust real wage growth is projected to boost consumption. Accommodative monetary policy, fiscal support and improvements in banks’ loan portfolios will also help consumption and investment to grow steadily. Strong merchandise exports and an increase in tourist arrivals will raise export revenues, and further strengthen consumption and investment. However, risks to these projections are tilted to the downside. Weaker-than-expected external demand could dampen export growth. In addition, deteriorating asset quality in the financial sector could undermine banks' lending capacity, although recent legislative changes following the failure of a major bank, including a new intervention mechanism, should mitigate these risks.

As the population ages and the working age population continues to decline, productivity will be key for maintaining strong growth. Potential reforms include better connecting multinational enterprises with the domestic economy and overcoming skills mismatches through higher public spending on tertiary education, vocational training and research and development, which could also alleviate skilled-labour shortages affecting specific sectors. Stronger competition and a more effective financial sector could improve the allocation of resources to their most productive uses. This could be achieved by further lowering market entry barriers, including in services sectors, and modernising financial sector policies. Broader reforms of bank supervision and insolvency rules could further strengthen financial sector soundness. The planned introduction of a carbon market, which could be accelerated, will help to achieve the emission reductions to which Viet Nam has committed. A high vulnerability to extreme climate events also calls for well-designed climate change adaptation measures.