Vietnam economy hit by slumping exports, power blackouts
Vietnam is expected to continue being a key beneficiary of the shift in global manufacturing supply chains towards competitive Southeast Asian manufacturing hubs, wrote Rajiv Biswas, Asia Pacific chief economist, S&P Global Market Intelligence.

Vietnam's GDP growth softens as exports weaken
Vietnam's real GDP grew by 8% in 2022, as the economy rebounded strongly from the economic disruption caused by the Covid-19 pandemic during second half of 2021. However, economic growth momentum moderated to 3.3% in the first quarter of 2023, reflecting the impact of weakening growth in industrial production and exports.
Vietnam's goods exports rose by 10.6% in 2022. However, the economic slowdown in the U.S. and EU, which together account for 42% of Vietnam's total goods exports, has resulted in a significant weakening in exports during the first four months of 2023, with Vietnam's total goods exports declining by 13% year-on-year.
The U.S. remains Vietnam's largest export market, accounting for 29.4% of total merchandise exports. Vietnam's exports to the U.S. rose by 13.6% in 2022, with the bilateral trade surplus with U.S. increasing to $95 billion. However, in the first four months of 2023, merchandise exports to the US fell by 21.6% year-on-year.
Exports to the EU were also weak, declining by 10.8% year-on-year in the first four months of 2023. Exports to the EU of computers, electrical products and components fell by 30% year-on-year in the January-April 2023 period, while exports of textiles and garments to the EU fell by 10.6% year-on-year.
Exports to mainland China also showed a significant decline, falling by 12.9% year-on-year in the four-month period. Exports of computers, electrical products and components as well as mobile phones to mainland China fell by 14.9% year-on-year.
Reflecting the slump in exports, the manufacturing sector has slowed in early 2023, with industrial production contracting by 1.8% year-on-year for the first four months of 2023, compared with positive growth of 7.8% year-on-year in the same period of 2022. Vietnam's industrial production had risen by 7.8% year-on-year in 2022, with manufacturing output up by 8.0% year-on-year.
The downturn in Vietnam's construction sector has also hit manufacturing output for building materials, with domestic cement sales down by 16% year-on-year in the January to April 2023 period. Construction steel sales in April 2023 were down by an estimated 15% year-on-year. For the first four months of 2023, steel sales were estimated to have declined by 23% year-on-year.
The challenges facing Vietnam's manufacturing sector have been compounded during May and June by power shortages resulting in electricity supply disruptions. A heat wave has driven up electricity consumption and reduced hydroelectric power supply, causing widespread disruption to manufacturing output due to power outages. Manufacturing production in industrial parks in northern regions of Vietnam have been particularly badly impacted, notably in Bac Ninh and Bac Giang provinces.
The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) dropped to 45.3 in May from 46.7 in April, thereby signalling a third successive monthly deterioration in operating conditions. Moreover, the latest decline was the most marked since September 2021. There were widespread reports of customer demand weakness across the latest survey.
The impact of this was most clearly felt with regards to new orders, which declined rapidly and to the greatest extent in 20 months. New export orders remained weak, with new business from abroad decreasing for the third month running.
With new orders continuing to fall, firms also reduced output midway through the second quarter of the year. Production was down for the third successive month, and at a marked pace that was the fastest since January. Output decreased across each of the three broad categories of manufacturing, with the sharpest decline at intermediate goods producers.
The May survey also showed that waning demand led suppliers to reduce their prices. Input costs decreased for the first time in three years as a result. The drop in input prices provided some leeway for firms to reduce their own charges in a bid to boost demand. Manufacturing output prices decreased for the second month running.
The CPI inflation rate moderated to 2.8% year-on-year in April 2023 compared with 3.4% year-on-year in March and 4.3% year-on-year in February. Core CPI inflation rose by 4.6% year-on-year in April and was up 4.9% year-on-year for the first four months of 2023.
In response to rising inflation and the strengthening USD versus the VND, Vietnam's central bank, the State Bank of Vietnam (SBV), raised its policy rate by 200 basis points (bps) in two 100bp steps during September and October 2022.
However, with Vietnam's economy slowing significantly in early 2023, the SBV has started easing monetary policy. The SBV cut its policy rates by 100 bps on March 15 and again by 50 bps on April 3 as concerns have increased about the impact of rising interest rates on the property sector, which has faced rising liquidity pressures. A further 50 bps rate cut was announced on May 23 as the economy has continued to slow.
Medium term growth drivers
Over the medium-term outlook for the next five years, a number of key drivers are expected to continue making Vietnam one of the fastest growing emerging markets in the Asian region.
Firstly, Vietnam will continue to benefit from its relatively lower manufacturing wage costs relative to coastal Chinese provinces, where manufacturing wages have been rising rapidly over the past decade.
Secondly, Vietnam has a relatively large, well-educated labour force compared to many other regional competitors in Southeast Asia, making it an attractive hub for manufacturing production by multinationals.
Third, rapid growth in capital expenditure is expected, reflecting continued strong foreign direct investment by foreign multinationals as well as domestic infrastructure spending. For example, the Vietnamese government has estimated that $133 billion of new power infrastructure spending is required by 2030, including $96 billion for power plants and $37 billion to expand the power grid. Severe power shortages during 2023 have highlighted the critical importance of rapid development of new power infrastructure as a key economic policy priority.
Fourth, Vietnam is benefiting from the fallout of the U.S.-China trade war, as higher U.S. tariffs on a wide range of Chinese exports have driven manufacturers to switch production of manufacturing exports away from China towards alternative manufacturing hubs in Asia.
Fifth, many multinationals have been diversifying their manufacturing supply chains during the past decade to reduce vulnerability to supply disruptions and geopolitical events. This trend has been further reinforced by the Covid-19 pandemic, as protracted disruptions created turmoil in global supply chains for many industries, including autos and electronics.
Vietnam has been one of the preferred destinations for South Korean and Japanese firms choosing to shift their production to the ASEAN region.
Economic outlook
Due to the severe economic impact of lockdowns triggered by the Covid-19 Delta wave in mid-2021, the pace of Vietnam's economic growth moderated to 2.6% in 2021, compared with the 2.9% growth rate recorded in 2020. There was a strong rebound in GDP growth momentum in 2022, at a pace of 8.0 % year-on-year, as domestic demand and manufacturing export production returned to more normal levels. However, in 2023, Vietnam's economy has shown moderating growth momentum as the slowdown in key export markets, notably the U.S. and the EU, has hit Vietnam's manufacturing exports.

Despite near-term headwinds to Vietnam's economic growth, over the medium-term economic outlook, a large number of positive growth drivers are creating favourable tailwinds and will continue to underpin the rapid growth of Vietnam's economy. This is expected to drive strong growth in Vietnam's total GDP as well as per capita GDP. The economic outlook from 2023 to 2026 is for rapid economic expansion.
With strong economic expansion projected over the next decade, Vietnam's total GDP is forecast to increase from $327 billion in 2022 to $470 billion by 2025, rising to $760 billion by 2030. This translates to very rapid growth in Vietnam's per capita GDP, from $3,330 per year in 2022 to $4,700 per year by 2025 and $7,400 by 2030, resulting in substantial expansion in the size of Vietnam's domestic consumer market.
Vietnam's role as a low-cost manufacturing hub is also expected to continue to grow strongly, helped by the further expansion of existing major industry sectors, notably textiles and electronics, as well as the development of new industry sectors such as autos and petrochemicals. Vietnam already has a domestic automaker of electric vehicles (EV), VinFast, which launched its first EV in Vietnam in 2021. In March 2022, VinFast announced a $2 billion investment to build an auto manufacturing plant in North Carolina, for manufacturing EV buses and SUVs, as well as EV battery manufacturing, with construction expected to commence in 2023.
For many multinationals worldwide, significant supply chain vulnerabilities have been exposed by the protracted disruption of industrial production in China as well as some other major global manufacturing hubs during the Covid-19 lockdowns. This will drive the further reshaping of manufacturing supply chains over the medium term, as firms try to reduce their vulnerability to such extreme supply chain disruptions. With U.S.-China trade and technology tensions still remaining high, this is likely to be a further driver for reconfiguring of supply chains. A key beneficiary of the shift in global manufacturing supply chains will be the ASEAN region, with Vietnam expected to be one of the main winners.
- Read More
Hanoi terminates Vinaxuki auto plant project, repurposes land for commercial complex
A long-stalled automotive manufacturing project by Xuan Kien Auto JSC (Vinaxuki) has been officially terminated by Hanoi authorities, and the reclaimed land in Phuc Thinh commune will be repurposed for a new commercial and service complex.
Industries - Tue, September 16, 2025 | 2:44 pm GMT+7
Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout
Authorities in the central province of Quang Tri are evaluating a proposal from Power Generation JSC 1 (EVNGENCO 1), a subsidiary of state utility Vietnam Electricity (EVN), to take over the Quang Tri thermal power plant project, following the withdrawal of Thai investor EGATi.
Energy - Tue, September 16, 2025 | 1:44 pm GMT+7
Amata to sell stakes worth $46 mln in Vietnam units to Novaland-tied buyers
Amata VN, the Vietnam arm of Thailand’s leading industrial park developer Amata, has approved a plan for its subsidiary Amata City Long Thanh Urban JSC (ACLT) to sell its remaining 51% stakes in two entities to local developer Novaland-linked buyers.
Real Estate - Tue, September 16, 2025 | 12:19 pm GMT+7
Vietnam already meets FTSE's criteria for stock market status upgrade: Finance Minister
Vietnam has fulfilled the criteria for a stock market status upgrade by FTSE Russell through reforms aimed at facilitating foreign investment inflows into its market, said Minister of Finance Nguyen Van Thang.
Economy - Tue, September 16, 2025 | 9:36 am GMT+7
Banks should be allowed to distribute, invest in mutual fund certificates: Vietnam's finance ministry
The Ministry of Finance is proposing a key reform that would allow commercial banks to invest in and distribute mutual fund certificates, as part of a broader plan to restructure the investor base and foster the development of Vietnam’s fund management industry.
Finance - Tue, September 16, 2025 | 8:00 am GMT+7
E-commerce boom a major driver of Vietnam's packaging paper industry growth
Vietnam's paper packaging industry is entering a period of strong growth, with an average annual growth rate forecasted at 10% until 2030.
Companies - Mon, September 15, 2025 | 10:20 pm GMT+7
Vietnam needs support from UK in developing international financial center: Deputy PM
Permanent Deputy Prime Minister Nguyen Hoa Binh has called on the UK and the City of London to continue supporting and accompanying Vietnam in promoting and introducing its international financial center (IFC).
Finance - Mon, September 15, 2025 | 10:12 pm GMT+7
Vietnam enforces 8% capital adequacy ratio for banks from Sept 15
Commercial banks and foreign bank branches in Vietnam must maintain a minimum capital adequacy ratio (CAR) of 8%, including at least 4.5% in Tier 1 core capital and 6% in Tier 1 capital, starting from September 15.
Banking - Mon, September 15, 2025 | 10:04 pm GMT+7
Tool for wood traceability management debuts in Vietnam
The Vn-WoodID application has been officially launched in Vietnam, becoming a key tool contributing to wood traceability.
Companies - Mon, September 15, 2025 | 10:00 pm GMT+7
Sun Group, US Embassy foster aviation-hospitality cooperation
Sun Group, in collaboration with the US Embassy in Vietnam, hosted the US – Vietnam Aviation Partnership Roundtable on September 12, bringing together 15 leading American corporations in aviation, technology, and financial services, opening up opportunities to position Phu Quoc as a new aviation and tourism hub in the region.
Companies - Mon, September 15, 2025 | 9:54 pm GMT+7
Vietnam tops Thai giant SCG’s overseas markets with 9% revenue contribution in H1
Vietnam remained the largest overseas market for Thailand’s Siam Cement Group (SCG) in the first half of 2025, contributing 9% of consolidated sales.
Companies - Mon, September 15, 2025 | 8:10 pm GMT+7
Central Vietnam to have new airport Mang Den
Procedures to adjust Vietnam's airport system planning, including the addition of Mang Den Airport in central Vietnam, are being proceeded, according to the Ministry of Construction.
Infrastructure - Mon, September 15, 2025 | 5:16 pm GMT+7
Vietnam's government seeks to position country as 'regulated hub for digital assets in Asia': Dragon Capital
The Vietnamese Government has advanced the regulation of digital assets, with a resolution launching a five-year pilot framework for issuance and trading. This framework signals the Government’s intent to position the country as a regulated hub for digital assets in Asia, which could attract new capital inflows, write Dragon Capital analysts.
Economy - Mon, September 15, 2025 | 2:20 pm GMT+7
Agribank introduces sizable $4.17 bln preferential credit package
Right from the beginning of 2025, Agribank launched a substantial preferential credit package worth VND110 trillion ($4.17 billion) to support individual customers.
Companies - Mon, September 15, 2025 | 1:32 pm GMT+7
'Precious space' in Vietnam's monetary policy
The Federal Reserve's continued cuts in 2025, with the most recent in September, are considered a valuable policy "space" for the State Bank of Vietnam (SBV) to maintain low interest rates to support growth without having to worry too much about exchange rates.
Economy - Mon, September 15, 2025 | 10:15 am GMT+7
Vietnam’s central bank sells $1.5 bln to stabilize currency: broker MBS
The State Bank of Vietnam (SBV) intervened in the foreign exchange market by selling approximately $1.5 billion via 180-day cancelable forward contracts from August 25-26, in an effort to ease pressure on the Vietnamese dong, according to a recent report by MB Securities (MBS).
Banking - Mon, September 15, 2025 | 8:04 am GMT+7
- Travel
-
New train helps tourists explore landmarks of Hanoi, Bac Ninh province
-
Cam Ranh airport in central Vietnam tourism hub set to be among country’s largest
-
VAFIE hosts second 'Golf Club for Business' outing
-
Vietnam aviation authority supports full shift of international flights to Long Thanh airport
-
Vietravel Airlines soars under T&T Group helm
-
Ha Long, Hoi An, Sa Pa honored as top Southeast Asian destinations by Gulf News