Strategies to Achieve a Two-Digit Growth Target

Vietnam recorded 7.83% year-on-year GDP growth in Q1 2026, but the outlook for 2026 requires a flexible policy approach described as a “conditional acceleration” to achieve a two-digit growth target while maintaining macro stability. March and Q1 data show the economy sustaining solid momentum amid external uncertainty, supported by industrial production, consumer services (including tourism), and investment.

Key issues shaping the growth outlook for 2026

1) Export growth remains uneven between FDI and the domestic economy

In Q1 2026, domestic exports reached $24.47 billion, down 16.6% year-on-year, while FDI exports rose to $98.46 billion, up 33.3%. FDI accounted for 80.1% of total export turnover. The merchandise balance shifted to a deficit of $3.64 billion, with the domestic economy running a deficit of $10.73 billion while FDI posted a surplus of $7.09 billion.

The import structure also highlights dependence on external inputs. Machinery and input materials accounted for 93.9% of total imports. Imports from China totaled $50.1 billion and from Korea $18.7 billion. The article notes that if geopolitical tensions push up energy prices and logistics costs, the impact could feed into domestic production costs.

2) Inflationary pressures became clearer in March

March 2026 CPI rose 1.23% month-on-month and 4.65% year-on-year, the highest March CPI in five years. In the first quarter, CPI increased 3.51%, with core inflation at 3.63%. March core inflation rose 3.96% year-on-year. The article points out that core inflation higher than overall CPI suggests price pressures are spreading beyond temporary factors.

Transport costs rose 12.85% in March, driven by gasoline up 29.72% and diesel up 57.03%. Housing, electricity, fuels, and construction materials increased 0.77%. While inflation is described as manageable, monetary policy room has narrowed. The input-price index for production rose in Q1 2026, and 31.6% of households reported adverse effects from rising prices, indicating risks to real purchasing power and enterprise margins.

3) Monetary policy faces tighter balancing as funding costs rise

By 24 March 2026, broad monetary supply increased 1.04% versus end-2025; deposits rose 0.44% and credit rose 2.15%, slightly slower than in 2025. Deposit rates have continued to rise since late 2025, while lending rates remained around 7.1–9.4% per year. The article interprets this as liquidity not being extremely tight, but the cost of funds rising—weakening policy transmission to businesses, especially SMEs.

The end-March central exchange rate was around 25,102 VND/USD, largely flat versus end-2025. The domestic USD price and USD index rose due to increased safe-haven demand amid geopolitical risk. The VN-Index at end-Q1 2026 fell 6.2% from end-2025, reflecting cautious market sentiment even as liquidity increased.

4) Business conditions improved, but durability and confidence remain fragile

In Q1 2026, 96,000 new enterprises were registered or resumed operations. About 63,500 enterprises stopped temporarily, 16,600 ceased operations pending dissolution, and 11,700 completed dissolution. The article estimates roughly 30.6 thousand enterprises exited the market per month versus about 32.0 thousand entering or resuming per month, indicating a strong “filtering process” alongside recovery.

Average registered capital per new enterprise fell by 4.3%, and total additional registered capital fell by 5.1%, suggesting private sector investment confidence remains weak. A business sentiment survey from the General Statistics Office showed only 23.8% of manufacturers assessed Q1 2026 better than Q4 2025, while 30.1% still faced difficulties. Only 17.7% reported new export orders rising, and 27.3% reported export orders falling, implying order books—especially external demand—are not yet firmly secured.

5) Investment and services are gaining momentum, but spillovers to domestic firms are critical

Public investment disbursement reached 133.2 trillion VND, equivalent to 14.5% of the annual plan. Registered and realized FDI both rose strongly. International arrivals reached 6.76 million, up 12.4% and the highest first-quarter level on record.

The article cautions that without stronger links between public investment, FDI, and tourism growth and domestic firms, value chains, and high-quality jobs, spillover effects may remain limited and growth could become more polarized by sector.

6) Labor market stability at the surface, with structural bottlenecks underneath

For the working-age group, the unemployment rate in Q1 2026 was 2.21%, but youth unemployment was 8.86%. Around 1.6 million youths were unemployed and not participating in education or training, about 11.4% of total youth. The article suggests growth has not yet fully translated into sustainable job opportunities for young workers, which could constrain welfare and productivity in the medium term.

What it would take to reach a two-digit growth target in 2026

March data indicates the economy started the year positively, but policy pressures have increased. The article states that achieving the two-digit target would depend on favorable conditions, including faster oil price declines, inflation anchored, accelerated public investment, exports maintained at high levels, and stronger manufacturing processing momentum.

With Q1 2026 growth at 7.83%, reaching around 10% for 2026 would require the remaining three quarters to average roughly 10.7% growth. The article characterizes the 10%+ scenario as conditional and aspirational.

Transition to “conditional acceleration”: policy priorities

Fiscal policy should lead growth

The article calls for accelerating public investment toward infrastructure projects with absorptive capacity and spillovers into construction, materials, logistics, supporting industries, and related services. It emphasizes that disbursement must be aggressive, with streamlined procedures for investment, bidding, and inputs. It also highlights “public investment and diversification of export markets” as key pillars to counter shocks.

Monetary policy should remain flexible but not broadly eased

Given March CPI at 4.65% and Q1 CPI at 3.51%, the article suggests maintaining stable liquidity and controlling interest rates while directing credit toward real-output sectors such as processing/manufacturing, exports, agriculture, infrastructure, and SMEs. It argues for selective credit support rather than broad easing that could risk future inflation.

Price management should anchor expectations

To support a 10%+ growth path, the article states annual CPI should be kept mainly in the 3.6–4.0% range. It also calls for price-management scenarios for gasoline, electricity, health, education, and public services to avoid stacking shocks. The article notes readiness to use tools such as taxes, fees, or stabilization funds if Brent crude remains high; Brent is cited as around $109 per barrel, higher than the downward trajectory assumed by the U.S. EIA for the rest of the year.

Activate three real growth drivers together

• Exports: fully exploit FTAs, expand markets, reduce clearance times, support logistics, and promote trade for high-potential groups.
• Processing/manufacturing: prioritize removing input barriers, orders constraints, credit bottlenecks, and supply-chain issues for electronics, machinery, textiles, leather, and agro-processing.
• Domestic demand: combine stimulus with tourism, trade, services, and a recovery in real purchasing power, rather than relying solely on credit expansion.

(Author: Government Finance Ministry expert)

Note: The full article content is published in Vietnam Economic Journal 15-2026 dated 13/04/2026.