Strong 2025 economic performance carries further positive momentum

Jola Pasku, Senior economist S&P Global Market Intelligence

The composition of growth remained broadly unchanged, with industry and services leading in terms of annual growth and overall contribution to headline growth. Within industry, the processing and manufacturing sector recorded the highest growth since 2019 with support from electronic exports. The service sector was propelled by private consumption and tourism.

On the demand side, private consumption strengthened as labour market conditions improved, public sector wages rose, and tourist arrivals surpassed pre-pandemic levels. Investment activity also gained momentum, supported by both new project launches and continued capacity expansion across manufacturing and infrastructure.

Granular data suggest Vietnam’s external sector has so far remained resilient to the effects of US tariffs (20 per cent from August 7) and widespread damage caused by unfavourable weather conditions in the final quarter of 2025.

The global electronics upcycle, combined with heavy front-loading of shipments ahead of anticipated tariff increases, helped lift Vietnam’s exports of goods by 17.5 per cent year over year to $471 billion in 2025. Over 77 per cent of exports were driven by foreign-invested enterprises, with the largest gains recorded in shipments of electronics and seafood, each recording double-digit growth.

Mirroring the pick-up in export demand, Vietnam’s industrial production grew by 9.3 per cent on-year during this period. The United States remained by far the largest export destination, with export turnover surging 28.2 per cent on-year to $153.2 billion in 2025, accounting for roughly one-third of Vietnam’s total exports.

With exports to the US outpacing total export growth, Vietnam’s market share in the US continued to climb in 2025 as the threat of higher tariffs boosted demand for computers, machinery and textiles products.

Despite tariff uncertainty, Vietnam’s strong manufacturing fundamentals helped bring in a steady level of newly registered capital investment in 2025 reaching $38.42 billion (up by 0.5 per cent on-year). Notably, newly registered capital from mainland China rose to $3.6 billion during 2025, accounting for 21 per cent of total foreign direct investment (FDI) commitments.

FDI disbursement reached $27.62 billion, up 9 per cent from 2024. Moreover, the bulk of these pledges targeted the manufacturing and processing industries, which will likely feed the pipeline of future growth.

Vietnam’s economy defied expectations to record another impressive economic performance in 2025. Given the heavy front-loading witnessed in 2025, a normalisation in exports is anticipated in the first half of 2026 likely limiting the contribution to growth coming from trade.

The Vietnamese economy could cool in 2026 as high base effects also come into play. Key risks to the outlook centre around possible re-escalation of tariff tensions, including potentially stricter origin rules from the US, which could undermine exports and investment.

At the same time, the domestic sector is expected to remain resilient. Solid wage growth on the back of FDI job creation should support private consumption. With the number of operating enterprises growing by a markedly 27.4 per cent year over year during 2025, asset accumulation will likely strengthen over the near-term, even if FDI inflows face a temporary slowdown in 2026 in lieu of lingering trade uncertainties.

Vietnam’s near-term outlook is bright, and there is a good chance that the 2026 economic performance will continue to outperform its regional peers. Vietnam’s comparative advantage and growing role in global supply chains will likely become a greater gravitational pull for production migration as global supply chains realign.