Ho Chi Minh City economy grows 8.27% in Q1 2026, highest in five years

Ho Chi Minh City’s economy expanded 8.27% year-on-year in Q1 2026, the highest growth rate for the first quarter in the past five years, according to the Ho Chi Minh City Statistics Office. The city’s services-led performance, stronger foreign direct investment inflows, and a revival in investment activity are helping lay a foundation for faster growth in subsequent quarters.

Growth drivers and sector performance

In Q1 2026, gross regional domestic product (GRDP) grew 8.27%, marking a continued recovery trajectory. The services sector remained the main contributor, increasing 8.91% and accounting for 56% of GRDP growth.

Within services, transport and warehousing rose 12.18%, the fastest among service subsectors, highlighting the growing role of logistics in supporting goods movement and improving economic efficiency.

Trade activity increased 8.85%, but at a slower pace than overall services growth, suggesting domestic consumption is cooling and nearing saturation. Financial activities grew 8.26%, indicating improved capital absorption, though credit growth remained below the national average.

Industry and construction: solid output, uneven momentum

The industrial and construction sector grew 7.73% and contributed 32.6% to GRDP growth, reflecting that the sector has not yet met expectations. Industrial production rose 7.71%, with processing and manufacturing up 8.46% and continuing to be a key driver.

The Industrial Production Index (IIP) increased 11%, while four major industries rose 13.6%, including the chemical-pharmaceutical sector.

Despite these gains, industrial growth was constrained by limited power generation and mining output. Electricity production and distribution rose only 3.08%, attributed to reduced thermal power output, while mining activity increased modestly due to constrained crude oil and gas production.

Investment and business activity

Investment activity was a bright spot. Total social investment in Q1 2026 was estimated at 141,781 billion VND, up 10.7% year-on-year. Public investment was accelerated, but the disbursement rate was about 10.5% of the year’s plan, leaving substantial room for further rollout in the coming quarters.

The business environment remained supportive, with more than 13,600 new enterprises established. Foreign direct investment reached nearly USD 2.9 billion, up 219.7% year-on-year, signaling continued investor confidence.

Prices, costs, and pressure on firms

Cost pressures and rising prices continued to weigh on production and business activities. The consumer price index (CPI) in Q1 2026 increased 3.36%. The industrial producer price index also rose due to higher input costs.

In particular, the services price index climbed sharply, especially in transport and warehousing, reflecting direct impacts from logistics costs and energy prices. A survey showed 31.6% of firms reported that current production and business conditions were more difficult than in the previous quarter.

What is driving growth and what could hold it back

The Statistics Office said Q1 growth was shaped by both external and internal factors. Global economic fluctuations increased production and logistics costs, and the city’s open economy meant it was directly affected by international trade conditions and energy prices.

Internally, growth momentum was affected by delays in public investment disbursement relative to targets, credit not spreading broadly, and signs that domestic demand is cooling.

Outlook for Q2 2026 and policy recommendations

To sustain the recovery into Q2 2026, the Statistics Office recommended closely monitoring domestic and international energy price developments to adjust policy in a timely manner, support businesses, and stabilize living standards. It also called for boosting domestic demand through stronger consumer promotions and expanded trade-services activities to broaden aggregate demand.

Accelerating public investment implementation and disbursement—especially for key infrastructure projects—was highlighted as crucial for generating spillovers and driving growth. The office also emphasized improving the investment climate, supporting small and medium-sized enterprises, and adopting digital technology to raise productivity and improve adaptability through an innovation ecosystem.

Quarter-end survey results indicated a more positive outlook for Q2 2026: 43.5% of firms forecast favorable conditions, while the share of firms facing difficulties fell to 22.9%. Sectors expected to improve include processed foods, textiles, apparel manufacturing, electronics, and electrical equipment.