Vietnam enjoys robust recovery amidst global challenges

The Vietnamese economy is demonstrating remarkable recovery amidst global turbulence, earning positive endorsements from major international organizations like the IMF, OECD, World Economic Forum (WEF), and UOB bank.

However, proactive adaptation and strong reform will be the keys for the Southeast Asian country to maintain its sustainable economic growth as external challenges intensify, they suggested.

Strong growth trajectory captures international attention

Vietnam kicked off 2025 with GDP growth of 6.93% in Q1, building on 2024's stellar 7.09% expansion. These figures reflected the country's flexible economic management and adaptability in navigating external headwinds.

At a meeting with Prime Minister Pham Minh Chinh on the sidelines of the 16th Annual Meeting of WEF in China’s Tianjin city, WEF Interim chairman Peter Brabeck-Letmathe affirmed Vietnam’s increasingly prominent role in global economic networks.

He stressed how its flexible management ability and independent foreign policy have created powerful magnetism for international business communities.

The MoU signed with WEF in Tianjin in 2023 contributed to connecting Vietnam with multiple global corporations, providing the country with various opportunities to lure high-quality foreign investments, he said.

WEF president and CEO Borge Brende shared this optimism, praising Vietnam's ambitious double-digit growth targets for the coming decade, which are possible if current momentum continues.

The OECD, in its Vietnam 2025 report released mid-June, recognized the country’s significant long-term progress. Chief economist Alvaro Pereira expressed confidence that Vietnam could achieve high-income status by 2045 or even sooner with sustained reform efforts and integration.

From the perspective of the private economic sector, Singaporean bank UOB identified clear signals of recovery in Vietnam's economy in Q2. Their latest forecast projected Q2 GDP growth at 6.1%, bolstered by U.S. tax policy deferrals and proactive responses from the Vietnamese Government and businesses.

According to UOB surveys, 60% of Vietnamese enterprises are optimistic about their growth prospects over the next year, and nearly half are planning to expand into international markets.

External risks on the horizon

Despite positive growth indicators, Vietnam's economy currently faces significant challenges, particularly from external factors.

The IMF warns that Vietnam's growth outlook remains heavily reliant on the outcomes of trade negotiations, while global uncertainty remains high.

Head of the IMF mission to Vietnam, Paulo Medas, noted that escalating trade tensions will pose significant hurdles to exporters, and domestic financial pressure may intensify due to tightening credit conditions and high corporate debt levels.

Both UOB and IMF mentioned the U.S. trade policy, with the April announcement of reciprocal tariffs of 46% on several Vietnamese exports having triggered concerns across the global market.

However, the U.S. subsequently delayed its implementation for 90 days for negotiation time. According to the UOB, Vietnamese exports heavily depend on key sectors including electronics, furniture, textiles, and footwear, which comprise approximately 80% of export value to the US; therefore, any trade policy changes could leave substantial impacts.

Proactive adaptability, reforms seen as foundation stones

Against the backdrop of multiple risks, international organizations have recognized Vietnam’s efforts in maintaining its macro-economy and promoting reforms.

The IMF held that fiscal policy plays a leading role in economic management, particularly in the context of Vietnam’s low public debt levels. Accelerating public investment timelines and expanding social safety networks will boost short-term growth.

The IMF suggested Vietnam focus on stabilizing inflation expectations while allowing greater exchange rate flexibility to adapt to external shocks. Simultaneously, modernizing monetary management frameworks by replacing credit growth ceilings with prudential policy frameworks will enhance management effectiveness.

The OECD, in the meantime, underscored the significance of institutional reform, including expanding the tax base, improving social welfare systems, and promoting renewable energy. Attracting high-quality FDI must accompany enhanced domestic capacity building, intellectual property protection, and human resources development.

The bank reported that 80% of surveyed export-oriented enterprises have proactively addressed tariff risks through multiple solutions, including supply chain diversification, increased localisation, and investments in digitalisation and sustainable development. Many companies are targeting ASEAN and European markets as potential destinations to reduce dependence on traditional markets.

Despite experiencing short-term fluctuations, international organizations are optimistic about Vietnam's medium- and long-term prospects.

Both the IMF and OECD believe that with solid macroeconomic fundamentals, a clear reform agenda, and active involvement from the private sector, Vietnam is well-positioned to maintain stable growth and enhance its position in global value chains.

UOB forecasts Vietnam's GDP growth at 6% for 2025 and 6.3% in the following year. Since the global economy is turbulent, maintaining reforms, enhancing productivity, and strengthening competitiveness will enable Vietnam to seize opportunities for breakthrough development.

The Vietnamese Government is persistent with its 8% growth goal though disadvantages outweigh advantages, with a focus on solutions to respond to U.S. reciprocal tariffs, PM Pham Minh Chinh told a cabinet meeting on June 6.

The Prime Minister noted that achieving a growth of at least 8% for 2025 requires enormous efforts given challenges, including U.S. tariffs.

"Macro economic management, especially regarding interest rates, exchange rates, and inflation, is under huge pressure amid external turbulences.

"Business activities in many sectors are still difficult, while access to credit remains limited. The number of domestic private firms ceasing operations is still large," he said.

The cabinet leader added that traditional growth drivers have not met government expectations, while new growth drivers are in their early stages and need time to be effective.