Vietnam economy grows 6.93% in Q1, highest in 5 years

Vietnam's economy expanded 6.93% in the first quarter of the year, the highest growth since 2020, the General Statistics Office reported on Sunday.

The tally is lower than some international organizations' forecast for the quarter, such as Standard Chartered (7.7%) and UOB (7.1%).

StanChart in its release on Saturday wrote: "Vietnam’s economic outlook remains supported by strong integration into global trade networks through multiple free trade agreements, along with FDI inflows. These factors continue to strengthen the country’s position in global production and exports."

Nguyen Thi Huong, head of the GSO, under the Ministry of Finance, attributed the Q1 growth level to the world's "rapid changes and instabilities".

The industrial, construction and service sectors remained major forces of the growth. Services contributed the most to the added value of the economy (more than 53.74%).

High consumption demand during the Lunar New Year and the surging number of international visitors drove the high growth of the trade and service sector. This sector increased by 7.7% compared to the previous year.

Industry and construction continued to flourish. The industrial sector expanded by 7.32%, with processing and manufacturing recording a growth rate of 9.28%. The figure for agriculture, forestry, and fishery was 3.74%.

In terms of economic structure, services accounted for 43.44%; industry-construction 36.31%; and agriculture-forestry-fishery 11.56%.

The first quarter saw an external trade turnover of over $202 billion, up 13.7% year-on-year. Of this, exports rose by 10.6% and imports by 17%, leading to a trade surplus of $3.16 billion.

Many sectors reportedly recovered, but businesses still faced many difficulties. The number of companies dissolved or suspending operations in Q1 was higher than those newly established or returning to the market.

In the quarter, the country had more than 36,400 newly established enterprises, with total registered capital of VND356,800 billion ($13.83 billion).

The number of firms returning to operation inched up 2.4% to over 36,500 units. This meant there were more than 24,300 newly established or returning enterprises each month.

However, the number of enterprises closing or dissolving still increased sharply. On average, nearly 26,300 companies withdrew from the market each month. This means the number of companies closing each month was about 2,000 higher than those newly established.

The GSO's survey of business trends at manufacturing and processing enterprises - the driving force of the economy - showed that over 24.1% of respondents said their business situation was better than in Q4/2024.

More than 47% of businesses assessed it stable, while the rest said "difficult".

The consumer price index (CPI) in the first 3 months increased by 3.22% compared to the same period in 2024.

In a release on April 1. S&P Global stated that the manufacturing production in Vietnam grew for the first time in three months during March, and to the largest degree since August last year amid renewed increases in both output and total new orders.

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) posted above the 50.0 no-change mark for the first time in four months during March, thereby signalling an improvement in business conditions at the end of Q1/2025.

At 50.5, the PMI was up from 49.2 in February and pointed to a slight strengthening in the health of the sector.

The government recently raised its 2025 growth target to at least 8% (from 6.5-7%), with a higher inflation expectation of 4.5-5% to create room for monetary policy flexibility.

In its release on Saturday, StanChart said its 2025 GDP growth forecast remains at 6.7%, with moderation expected in H2.

In its note on March 12, UOB commented: "Taking into account the above factors, we stay cautiously positive for Vietnam’s outlook. We maintain our call for Vietnam’s full year growth forecast at 7% in 2025, assuming Q1/2025 GDP growth of 7.1%. For 2026, we anticipate the expansion pace to step up to 7.4%, benefitting from the government’s efficiency drive."

Vietnam’s real GDP in Q4/2024 surged 7.55% year-on-year, extending the momentum from a revised 7.43% in Q3/2024, and far ahead of market expectations.

With the surprisingly strong performances in three straight quarters, the country's economy expanded 7.09% in 2024 from 5.1% in 2023, beating handily consensus call of 6.7% and official target of 6.5%.