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MACRO UPDATE JUNE 2025: 1H25 ECONOMIC GROWTH OUTLOOK: OPTIMISTIC AMID EXTERNAL PRESSURES

The effect of rushing export orders before the July 9 deadline continued to manifest in May across key export industries. Export growth to the U.S. averaged 24.7% over the first three quarters, with the strongest growth in toys, followed by electronics and chemicals.
After the noisy tensions surrounding the tariff war subsided, business confidence returned to Vietnamese manufacturers. However, the economy will have to accept the reality that the rush for export orders will gradually diminish, and export orders are unlikely to grow in 2H25.
Foreign direct investment (FDI) attraction in the first five months of 2025 reached USD18.4 billion, a 66% increase compared to the same period last year. Growth following the “Liberation Day” event was higher than before. However, FDI attraction from China, Taiwan, and Hong Kong declined after the “Liberation Day” event. Similarly, registered FDI in the manufacturing sector also slowed significantly.
A bright spot is that FDI disbursement maintained growth, with cumulative realized FDI reaching USD8.9 billion, an 8% increase compared to the same period, equivalent to 31.8% of the 2025 FDI attraction target.
Suppose the pace of public investment disbursement in May 2025 is sustained. In that case, the 2025 public investment disbursement target remains feasible, corresponding to a public investment growth rate of approximately 26.5% for the remainder of 2025.
Data in manufacturing, retail, and investment in the first five months of 2025 raises expectations that Q2 economic growth could exceed 7.0%.
In May 2025, the National Assembly approved action plans for the four pillars of domestic reform, expected to serve as a foundation for medium-term economic growth.
The unclear U.S.-China agreement brings two preliminary implications for Vietnam: 1) A 10% tariff is likely to be the reciprocal tariff Vietnam faces, excluding other conditions; 2) Vietnam’s lower effective tariff compared to China will support the continuation of the China+1 strategy.