Domestic demand the mainstay of Vietnam's economic growth: ADB

Vietnam's economy remains resilient to increasing uncertainties and high U.S. tariffs thanks to solid domestic demand, according to the Asian Development Bank (ADB).

In its September Asian Development Outlook (ADO) released on Tuesday, the bank has also revised Vietnam’s economic growth forecast, raising it to 6.7% in 2025 and adjusting to 6% in 2026. Inflation projections are slightly below the previous estimates published in April this year.

However, despite mounting headwinds from reciprocal tariffs and escalating geopolitical tensions globally and regionally, Vietnam’s economy has performed well in the first quarters of the year.

Growth accelerated to 7.5% by June 2025, marking its best first-half performance since 2010. This momentum was fueled by supportive government policies and a surge in export orders ahead of the new U.S. tariffs.

However, ADB forecasts growth to slow down for the rest of this year due to the impact of reciprocal tariffs that took effect on August 7.

While the domestic economy remains stable, growth is expected to slow down compared to the strong growth in the first half of 2025. In addition to revising up its 2025 GDP growth forecast for Vietnam, the bank also forecast inflation will be lower, at 3.9% in 2025 and easing slightly to 3.8% in 2026.

ADB country director for Vietnam Shantanu Chakraborty said that better coordination between the effective enforcement of fiscal and monetary policies will help avoid overburdening monetary tools and preserve macro-financial stability.

He said in the long term, wide-ranging regulatory reforms must tackle structural challenges, like ensuring climate resilience, boosting the private sector's competitiveness, enhancing the efficiency of state-owned enterprises, stepping up the modernization of the tax system, and digital transformation. This is vital for a more balanced growth model.

Nguyen Ba Hung, principal country economist at ADB Vietnam, emphasized a number of risks stemming from both global uncertainties and domestic factors.

Particularly, he stated that Vietnam's economic outlook mainly faces external risks, first of all the reciprocal tariff measures of the U.S.

In addition, global uncertainties, including the slowing growth of major global economies, will affect the import demand of partner countries, leading to the fact that Vietnam's export activities will have less chances to maintain the high growth momentum as in the past.

Regarding domestic risks, Hung said that the implementation of the Government's reform efforts in the initial stage may encounter some adjustments, making the policies not as effective as expected.

Hung also stressed that if the government's reform measures are well implemented, they could contribute to better growth than ADB's forecast.

The State Bank of Vietnam (SBV) has kept its policy rate at 4.5% since 2023, while injecting liquidity through open market operations to maintain ample market liquidity. By the end of August 2025, credit had increased by 11.8% compared to end-2024 and 19.9% over the same period last year, thus increasing demand for mobilizing capital.

By end-August 2025, the currency had depreciated by 3.7% against the U.S. dollar since end-2024, despite the dollar weakening against other major currencies. The decline added inflationary pressure to foreign debt repayments along with corporate foreign currency fundraising, according to ADB.

"With credit growth likely to reach or exceed the 16% target for 2025 and the SBV’s more flexible approach to credit growth management, bank lending should grow further toward the end of 2025."

However, there remain concerns over asset quality, loan portfolio risk, and potential inflationary pressures. In the nearterm, rising non-performing loans and declining bank profitability will limit space for further monetary easing, the bank added.

The Vietnamese government targets a GDP growth rate of 8.3-8.5% for 2025 and double-digit expansion for 2026-2030. According to the Prime Minister’s Policy Advisory Council", the target is "appropriate" given the favorable macroeconomic conditions and structural reforms.

The World Bank Group in its country economic update issued on September 8 stated that Vietnam's monetary policy has remained accommodative, as State Bank of Vietnam (SBV) interventions contained foreign exchange pressures and increased credit growth.

The WB predicted Vietnam’s GDP growth will moderate to 6.6% in 2025. After strong growth momentum in H1/2025, the Vietnamese economy is expected to cool in the remainder of the year as overall export growth normalizes.

"Our baseline projection assumes reduced net export contributions to GDP growth. However, the outlook remains heavily dependent on further trade developments."