Vietnam's Q1 2026 Economic Picture and Full-Year Forecast for 2026

Global economic activity in Q1 2026 advanced amid heightened uncertainty. Disruptions linked to the conflict in Iran and the closure of the Hormuz Strait disrupted strategic shipping routes, pushing up energy prices, logistics costs and insurance costs. At the same time, protectionism and tariff uncertainty persisted, making international trade and investment more difficult and increasing the risk of stagflation. Capital flows shifted toward safe-haven assets; inflation rose, interest rates remained high and the US dollar strengthened, contributing to higher exchange rates in many countries, particularly emerging markets, and narrowing monetary policy space. Energy security, food security, supply-chain risks, cybersecurity threats and climate-related risks remained persistent.

Major international organizations forecast global GDP growth in 2026 at about 2.7%–3.1% (depending on developments in Iran and the timing of Hormuz-related disruptions). Inflation is expected to be higher by roughly 0.5–0.7 percentage points versus early-2026 projections.

Vietnam’s Q1 2026: five key positives

1) Policy implementation and a growth target framework

Vietnam’s Party and State continued to implement the resolutions of the XIV Congress, maintaining a goal of GDP growth around 10% or more for 2026–2030. The approach is tied to reform of the growth model, productivity gains, improvements in quality and enhanced competitiveness. The Government issued 135 legal documents to implement the Party’s resolutions and other strategic conclusions, including 112 decrees, 80 resolutions and 26 directives.

Efforts to strengthen energy security and stabilize fuel prices supported inflation control. Measures included tax reductions for imports, environmental tax adjustments and targeted exemptions to support fuel prices, alongside budgetary support for price stabilization funds.

2) Strong GDP growth, led by manufacturing and services

Vietnam’s GDP growth in Q1 2026 reached 7.83% year-on-year, the strongest quarter in nine years, though still below the Government’s Q1 target. Manufacturing (processing and manufacturing) grew 9.73% and services rose 8.18%, together contributing about 75.5% to overall growth. Agriculture remained resilient at 3.58%.

Final demand (consumption) increased 8.45% YoY. Retail sales rose 10.9%, and tourism rebounded with 6.76 million international visitors (up 12.4% YoY) and about 32.5 million domestic visitors (up 10.2%). E-commerce surged 32.7%, while goods trade remained robust: exports rose 19.1%, imports rose 27%, and services trade increased by about 53%.

Despite the trade momentum, the goods and services trade balance ran a deficit of about $5.3 billion, which reduced overall growth by about 0.18 percentage points. FDI-export oriented enterprises recorded a surplus, while domestic exporters faced headwinds, with domestic enterprise exports down 4.3% and an import surplus of $10.7 billion.

3) Inflation contained below target

Macroeconomic stability and inflation control were maintained. CPI rose about 3.51% in Q1 2026 (YoY), staying below the 4.5% target. Core inflation rose about 3.63% YoY.

Improvements in growth quality and living standards continued. The share of the workforce trained reached 29.6%, and average worker income was around VND 9 million per month. Life-quality indicators also improved, with Vietnam’s happiness index ranking 45/147 globally and second in ASEAN.

4) Credit growth supported activity, with rates broadly stable

Credit growth accelerated alongside production and business activity. Deposits and lending rates rose modestly by approximately 0.3–1.0 percentage points as macro policy aimed to stabilize rates from early 2026. The State Bank of Vietnam guided credit institutions to keep rates stable to support growth.

The interbank exchange rate rose about 0.2%, though pressures persisted from inflation, high US dollar rates and a widening trade/services deficit. Policy tools helped moderate volatility.

5) Budget revenue improved, but revenue structure remained vulnerable

State budget revenue performed relatively well, reaching about 32.8% of the annual plan, up 11.4% YoY due to improvements in production, consumption and trade. However, the revenue structure remained vulnerable, with local revenue heavily reliant on real estate and oil revenue continuing to decline.

Key risks for the remainder of 2026

• External risks: geopolitical tensions, especially in the Middle East; continued global trade and technology tensions; and global growth slowdowns with inflation risks.
• Domestic growth momentum: traditional drivers may underperform while new drivers progress slowly; import-export balances remain negative; private investment growth moderated; and capital disbursement for public investment lagged in some sectors.
• Enterprise sector pressures: new business formation remains high while closures persist, particularly among small firms and energy-intensive, logistics and export-oriented companies; higher input and financing costs constrain margins; and liquidity conditions in some banks tighten as credit growth continues.
• A dual risk environment: rising interest rates and high real rates make the 10% growth target for 2026 more difficult; global events affect energy prices, transport costs and inflation, influencing domestic demand and investment decisions.

Vietnam 2026 scenarios: GDP and trade/FDI impacts

The report provided forecasts under three scenarios tied to the Iran conflict and its duration.

Base scenario (60% probability)

If the Iran conflict remains contained and resolves within about eight weeks, 2026 GDP could be 0.6–0.8 percentage points below the target. Exports could fall 0.8–1.0 percentage points and FDI could decline 0.8–1.0 percentage points due to cautious investor sentiment.

Negative scenario (30%)

If the Iran conflict expands regionally for 4–5 months, 2026 GDP could fall 0.8–1.2 percentage points below target. Exports could drop by about 2 percentage points and FDI could fall by 1–1.5 percentage points.

Worst-case scenario (10%)

If the Iran conflict intensifies and lasts through 2026, GDP could fall 1.2–1.5 percentage points below target. Exports could drop by more than 3 percentage points and registered FDI could decline by more than 2 percentage points due to higher logistics and insurance costs and increased risk aversion. New growth drivers related to science, technology, innovation and green-digital transformation may not yet deliver meaningful impact.

Recommendations and inflation assumptions

The report outlined five recommendations: continued effective implementation of XIV Congress resolutions and related strategic conclusions; strengthening energy security and applying policy measures in response to the Middle East conflict; sustaining growth by maintaining traditional export momentum and services (including logistics and tourism), improving public investment and disbursement, and accelerating private sector reform; accelerating adoption of innovation and digital transformation; and stabilizing macroeconomic conditions while ensuring price stability and financial market resilience.

For inflation assumptions, the report expects inflationary pressure to persist into Q2 and the second half of 2026 due to supply and demand dynamics, with credit growth targeted at 15%–16% and substantial public and private investment disbursement. Under the base scenario, if domestic fuel prices rise 15%–20% versus 2025, annual CPI could be 4.2%–4.7%. Under the negative scenario, if global oil prices average $83–87 per barrel, CPI could be 4.3%–4.8%. Under the worst case, if oil prices average $90–95 per barrel, CPI could reach 4.5%–5% or higher.