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MACRO UPDATE JANUARY 2026: THE RECOVERY WENT BEYOND SEASONALITY

Industrial production surged by 21.5% YoY, but remained almost unchanged MoM, mainly due to the Lunar New Year base effect (Tet 2025 fell in January), which distorted monthly comparisons. However, adjusting for the effects of the seasonal holiday, the recovery momentum in manufacturing remains positive. The PMI remained in expansion territory for the seventh consecutive month at 52.5, indicating that growth continues to be supported by output, new orders and employment (the strongest since June 2024). Meanwhile, export orders have increased for the third time in the past four months, particularly from Asia and India. One short-term risk to monitor is the lengthening of suppliers' delivery times, which could slow the overall pace of improvement.
Consumption recovered, supported by seasonal factors and improved demand following adverse weather conditions in Q4 of 2025. Retail sales and services revenue rose by 9.3% YoY. Inflation remained under control, with the CPI rising by 2.5% year-on-year and core inflation standing at 3.19%. Price pressures were mainly driven by services and housing, but this was largely offset by a decline in transportation costs due to lower fuel prices.
Business confidence among European enterprises improved markedly (EuroCham’s BCI for Q4 2025 reached 80), reinforcing the narrative of a favourable investment environment. However, key risks lie in the quality of policy implementation and the potential for regulatory overlaps during the rapid reform phase, as well as in the pace of public investment disbursement and the recovery of adjusted foreign direct investment (FDI) registrations in the coming months.
FDI flows showed signs of divergence. Disbursed FDI reached USD 1.68 billion (+11.3% YoY increase), the highest January figure in the past five years, reflecting the continued solid implementation of existing projects. However, registered FDI fell sharply to USD 2.58 billion (-40.6% YoY), mainly due to a contraction in adjusted capital, though newly registered capital remained positive. Manufacturing and processing continued to attract investment inflows.
Public investment saw a significant increase in planned scale and allocation level, with cumulative disbursement reaching VND 858.6 trillion by 31 January 2026 (equivalent to 94.8% of the Prime Minister's assigned plan). However, disbursement in January 2026 remained low at VND 19.1 trillion, indicating the typical early-year lag and putting pressure on acceleration from Q2 onwards to support growth momentum
Merchandise trade continued to grow strongly, with exports +30% YoY and imports +49.6% YoY — partly reflecting the Lunar New Year base effect. Even after adjusting for seasonality, January's performance still outperformed that of February 2025. Nevertheless, the trade balance shifted to a deficit of around USD 1.8 billion, primarily due to the FDI sector accelerating imports faster than exports (+47.3% YoY vs. +36.9% YoY). Amid increasingly unpredictable and geopolitical U.S. tariff policies, global businesses are shifting their focus from cost optimisation to risk optimisation, prioritising markets with stable FTAs and tightening technical standards and rules of origin. For Vietnam, this presents short-term risks for export-oriented sectors, but also an opportunity to enhance its position in market access networks, provided it accelerates input and origin standardisation and leverages FTAs to integrate more deeply into emerging supply chains.