Real estate, retail among key beneficiaries of Vietnam’s higher inflation: analysts

By My Ha, Minh Hue
Mon, March 24, 2025 | 4:26 pm GMT+7

Many sectors in Vietnam are expected to benefit significantly from the policy of allowing higher inflation to achieve an 8% economic growth this year, with real estate and retail standing out, according to economists.

Higher inflation beneficial for economy

On February 5, the government issued Resolution No. 25/NQ-CP, outlining growth targets for industries, sectors, and localities, ensuring the national growth goal for 2025 reaches at least 8%. Prime Minister Pham Minh Chinh acknowledged that this is a challenging target but emphasized, “No matter how difficult, we must achieve it.”

Accordingly, the monetary policy will continue to be managed flexibly, in harmony with fiscal policies (taxes, fees, increased revenue, and cost savings) to create favorable conditions for businesses and individuals. The Prime Minister also indicated that inflation might rise to stimulate economic growth.

For a GDP growth rate of at least 8% this year, Vietnam's credit must expand 16%. Photo by The Investor/My Ha.

For a GDP growth rate of at least 8% this year, Vietnam's credit must expand 16%. Photo by The Investor/My Ha.

Nguyen The Minh, director of research and development at Yuanta Securities Vietnam (YSVN), noted that there are three key macroeconomic factors in policy management: interest rates, exchange rates, and inflation. It is only possible to balance two of these factors at a time, not all three.

The Vietnamese economy is highly reliant on credit. To achieve 8% GDP growth, credit growth needs to be at least 16%, and for double-digit GDP growth, it must exceed 20%.

Although interest rates declined in 2024, credit growth reached only around 15%. Therefore, to drive higher growth, interest rates need to remain low to stimulate borrowing demand.

When prioritizing economic growth, controlling inflation becomes difficult. Vietnam will inevitably face inflation this year. However, Minh believed that higher inflation, at this time, is beneficial for the economy.

On one hand, many countries, such as China and Japan, are experiencing deflation. Additionally, inflation can be driven by two factors: cost-push and demand-pull.

In 2022, inflation surged due to cost-push factors like rising oil prices and shipping fees. This type of inflation negatively affects the economy. However, the cost-push factors have eased, and now, for inflation to rise, it must come from demand-pull, which requires stimulating consumption through an expanded money supply.

"Inflation increase is not necessarily bad. If inflation rises due to cost-push factors, it is negative. But if inflation hikes due to demand-pull, it is good for the economy," said the Yuanta expert.

However, Minh added that interest rates can only remain low but cannot go lower, as doing so would put pressure on the exchange rate. He suggested that Vietnam should align its policy with the U.S. Federal Reserve’s (Fed) approach and avoid creating a significant difference between the USD and the VND to prevent exchange rate tensions.

Quan Trong Thanh, director of analysis at Maybank Securities (MSVN), stated that the government’s acceptance of higher inflation to maintain an expansionary monetary policy and increase public spending shows its priority on boosting economic growth and supporting business profits, particularly in real estate, construction, retail, and consumer sectors. Moreover, businesses, in general, will be able to access loans more easily, stimulating investment and production expansion.

The government’s target of keeping inflation below 5% aims to provide room for monetary policy management, but it does not necessarily mean inflation will rise to 5%. Maybank Securities’s view is that inflation is not a significant risk for the economy this year. Vietnam’s economy is most influenced by macroeconomic fluctuations from China, which is dealing with deflation. China itself is actively promoting exports by lowering prices.

Key beneficiaries

In economics, inflation and the stock market are correlated, and inflation does not always negatively impact the stock market.

In some cases, the stock market is considered a top investment channel to hedge against inflation. A statistic from Agribank Securities (Agriseco) over 22 years since 2000 showed that in an environment with inflation below 5%, the VN-Index, representing the Ho Chi Minh Stock Exchange (HoSE), recorded an average monthly return of 1.8%.

Therefore, many experts held that prioritizing economic growth over controlling inflation will positively impact certain sectors of the stock market.

Thanh pointed out four key sectors that will benefit. The first is real estate and construction. An expansionary monetary policy and increased public spending can stimulate investment in construction projects. Real estate and construction companies can access loans more easily, spurring investment and expanding operations.

The second beneficiary is retail and consumer goods. Inflation can stimulate consumer spending, especially when people expect prices to continue rising. Retail and consumer businesses can increase their revenue and profits due to higher demand.

Public investment comes third. When the government accepts inflation, it can increase public spending to drive economic growth. This typically includes investment in infrastructure projects like roads, bridges, airports, seaports, and other public works. These projects will create significant demand for building materials, labor, and services, thus stimulating economic activity.

Finally, inflation is often accompanied by rising prices of essential commodities like energy, metals, and agricultural products. Companies in these sectors can benefit from higher prices.

A report from VPBank Securities (VPBankS) indicated that to achieve the economic growth target, credit should focus on two main areas: industrial production and services.

In industrial production, especially processing and manufacturing, the government should support and create conditions for existing projects to expand, driving growth in this sector. For services, tourism is identified as a key area.

The Prime Minister has called for improving tourism products and exploring additional support measures to attract international tourists. One important step is improving visa policies, including considering visa exemptions for certain groups of tourists to encourage longer stays.

Finally, public investment is considered a crucial driver of growth, especially in the context of declining international trade. 2025 marks the final year of the medium-term investment plan for 2021-2025, with the completion of key projects such as the 3,000 kilometers of North-South Expressway and the launch of new initiatives like the western section of the North-South Expressway, spanning over 1,200 km through 23 provinces and cities.

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