Vietnam's economy: stability as a foundation and reforms to drive sustainable growth

With positive results already in the first quarter, Vietnam’s economy is showing flexibility in adapting to changing conditions. Stability is providing a foundation, while ongoing reforms are expected to act as a driver for sustainable growth over the medium and long term.

Strengthening the domestic foundation

A key feature of Vietnam’s first-quarter economic performance is the shift from reliance on external drivers toward strengthening internal factors. As global demand weakens, the domestic market is increasingly acting as a pillar for growth.

Michael Kokalari, Chief Economist at VinaCapital, said the government’s policy management is focusing on stimulating domestic consumption and improving distribution efficiency—factors that support absorption capacity and help lay the groundwork for sustainable growth.

In the data, total retail sales of goods and services in Q1 rose 10.9%, while final consumption in GDP increased 8.45%. The figures indicate not only a recovery in volume, but also a structural shift from export-led growth toward a more domestically driven growth model.

International organizations including the OECD and the World Bank said strong domestic demand can reduce dependence on external factors and create space for domestic enterprises to develop.

Public investment and supply-chain shifts

International experts also pointed to public investment as a growth driver. The Singapore-based Business Times said the Vietnamese government is relying on a large-scale public investment campaign, with hundreds of projects under construction, to offset external obstacles.

Vietnam is also leveraging changes in global supply chains. Fortune noted that geopolitical volatility is creating opportunities to attract investment into new sectors, including data and artificial intelligence.

Kim Eng Tan, Asia Regional Director for Sovereign Ratings at S&P Global Ratings, emphasized that demand for electronics remains a key support. He also said FDI inflows in Q1 reflect investor confidence in Vietnam’s long-term prospects. Despite volatility, exports and FDI remain positive, supporting the overall economic picture.

FDI momentum and enterprise participation

Entrepreneur.com (US) said more international companies are choosing Vietnam as a key link in their global growth strategy, with FDI flows reflecting this trend. Total registered capital in Q1/2026 reached $15.2 billion, up 42.9% year-on-year, while implemented capital reached $5.41 billion, up 9.1%. The figures were cited as evidence of investor confidence and of Vietnam’s growing role in the new global production structure.

Beyond capital inflows, institutions are viewed as crucial for improving growth quality. The implementation of Resolution 68-NQ/TW on developing the private sector signals a shift in development thinking. Professor Dang Viet Anh (University of Manchester) said establishing the private sector as a growth engine can promote new growth drivers. Thai Thanh Long, Head of the Vietnam Business Association’s liaison office in Indonesia, said the policy expands room for Vietnamese enterprises to enhance international competitiveness.

WB emphasized the private sector as the main engine for employment and productivity, while the OECD highlighted improving the competitive environment as a key condition. More than 96,000 enterprises joined and re-entered the market in Q1, indicating early effectiveness of the process.

At the same time, the leading role of the state economy under Resolution 79-NQ/TW on state-owned economy development was cited as contributing to a more balanced growth structure.

Balancing stability and growth

Despite positive prospects, Vietnam’s economy still faces challenges. These include bottlenecks in demand, weaker linkages between the FDI sector and domestic enterprises, and the need to improve institutional frameworks and infrastructure.

Externally, the biggest risk comes from Middle East conflicts, which could disrupt energy supply, raise import costs, fuel inflation, and spread to transport, logistics, and production—affecting multiple sectors. External volatility can also weigh on international demand and exports.

Tamara Henderson (Bloomberg Economics) said all three growth drivers—consumption, investment, and exports—are under pressure, affecting Vietnam’s two-digit growth target.

S&P Global Ratings and Moody’s also warned that accelerating public investment could increase budget pressure and strain macroeconomic balances. Shan Saeed, Global Chief Economist at IQI Global (Malaysia), said inflation could rise to around 4% but remain manageable, while energy shocks could drive economic transformation and upgrading.

Professor Marc Fontecave (Collège de France) added that energy crises can create opportunities to transition to a greener and more sustainable economic model.

Outlook: room for macro stability

In this context, the central challenge is maintaining a balance between stability and growth. Michael Kokalari said macro management must reconcile these objectives, while Dong He, Chief Economist at AREEO, recommended that Vietnam gradually shift toward a neutral policy stance and strengthen macro controls to manage inflation risks.

Nevertheless, underlying factors remain supportive. Malaysia’s MBSB Bank said Vietnam remains a bright spot for attracting capital due to flexible governance and market stability. International organizations forecast Vietnam could become the third-largest economy in ASEAN by 2026 or 2027.

The AREO 2026 Outlook report said Vietnam is adapting well to regional and global fluctuations, integrating quickly into supply chains and emerging as a top destination for FDI. It concluded that Vietnam has ample room to maintain macro stability.

Accordingly, 2026 is seen as a turning point for Vietnam to convert advantages into a competitive edge. In the short term, the focus is on maintaining macro stability; in the long term, continued reforms, strengthening internal capacity, and improving resilience to global shocks are required.

Nguyen Ha

VietnamPlus (source)