Economic momentum builds as GDP and credit growth surge

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Monthly Insights

Vietnam’s economy delivered its strongest first-half performance in over a decade, with GDP expanding 7.5% YoY in H1 2025, driven by 8.0% growth in Q2, up from 6.9% in Q1. This acceleration was fuelled by strong exports and a rebound in services. Industrial production grew 9.2% YoY, led by an 11.1% rise in manufacturing output. Total trade reached $432bn, up 16.1% YoY, with exports rising 14.4% and imports 17.9%, resulting in a ~$7.6bn trade surplus. Public investment reached a five-year high, with disbursements exceeding $10.5bn, fulfilling nearly one-third of the annual plan. Registered FDI surged 32.6% YoY to $21.5bn, the highest first-half performance since 2009. Although new project licences dipped slightly, capital injections into ongoing projects more than doubled, signalling strong investor confidence. Actual FDI disbursements climbed 8.1% to $11.7bn, mainly in manufacturing and real estate. Inflation remained well managed, with the average H1 CPI at 3.3% and core inflation at 3.2%, both below the central bank’s target. Against this strong backdrop, credit growth accelerated sharply, with H1 bank lending rising 9.9%, well ahead of last year’s pace, supporting expanding business activity and consumer demand.

Vietnam continued advancing its regulatory reform agenda to enhance both competitiveness and financial stability. Recent amendments have strengthened institutional frameworks, notably through the revised Law on Credit Institutions, which formalises bad-debt handling and extends the State Bank’s authority over banking risks. In parallel, the government is pushing digital regulation, with new rules recognising cryptocurrencies and digital assets as separate asset classes, and a full legal framework expected by January 2026. Plans for International Financial Centres in Ho Chi Minh City and Da Nang underscore the country’s ambition to become a regional finance hub. Administrative reform is also gathering pace. The streamlining of provincial governance(from 63 to 34) is now complete, while a newly passed Legal Reform Resolution gives the government the flexibility to amend or suspend conflicting regulations across priority sectors. In real estate, removing pre-build construction permits in favour of post-build inspections is expected to cut approval times and lower compliance costs, reinforcing the broader effort to simplify doing business.

The key catalyst was President Trump’s 3 July announcement of a provisional US–Vietnam trade agreement framework, significantly reducing earlier uncertainties. Under this proposed agreement, Vietnam’s exports would be subject to a relatively advantageous tariff rate of 20%, well below the considerably higher rates targeting regional competitors like Bangladesh (35%), Thailand (36%), and Indonesia (32%). This tariff differential reinforces Vietnam’s appeal as a comparatively stable and lower-cost manufacturing base. While questions remain around the implementation of new transshipment rules, the 20% rate is far less disruptive than the 46% worst-case scenario previously modelled, which implied a GDP hit of 1.4–2%. At current levels, the macroeconomic impact is likely to be limited, and insufficient to trigger major FDI relocation given the lower differential with peers. These developments boosted investor sentiment, sparking notable gains across export-driven industries, industrial real estate developers, and financial stocks. Conversely, energy equities corrected in line with falling global oil prices, while defensive sectors rotated into cyclical areas amid improving market confidence. With strong liquidity, sound macroeconomic fundamentals, and expected Q2 earnings growth of around 14% YoY, the equity outlook remains positive, supporting further market strength in the second half of 2025.

In conclusion, our equity outlook remains strong, with the tariff overhang likely to be settled in a net-positive manner for Vietnam. Vietnam’s economy is on a solid growth trajectory, supported by strong exports, rising consumption, and proactive public investment. Inflation remains manageable, and ongoing reforms in finance, real estate, and administration are improving the business environment.