Six metrics behind Vietnam’s 8% growth that complicate the celebration
The country’s growth story is more uneven than top-line figures suggest
[HO CHI MINH CITY] Vietnam ended 2025 on a high note. Gross domestic product expanded 8 per cent from the year before, marking the second-fastest pace in 15 years, trailing only the post-pandemic rebound of 2022.
Nominal GDP climbed to an estimated US$514 billion and GDP per capita crossed US$5,000, nudging the country of more than 100 million people into the upper-middle-income bracket.
Buoyed by the numbers, Hanoi has further raised the bar. The government is targeting double-digit growth in 2026, betting on higher public investment, export diversification, private-sector productivity gains and deeper capital markets.
Yet, beneath the headline figures, a closer look at six key metrics suggests Vietnam’s growth story is more uneven – and the 10 per cent growth goal may be harder to deliver – than the top-line figures imply.
1. Domestic sector left behind in trade
Vietnam’s trade surge of 18.2 per cent in 2025 to US$930 billion conceals a widening split between foreign manufacturers and domestic counterparts.
Foreign-invested firms – accounting for more than 77 per cent of export value – expanded shipments by about 26 per cent year on year, according to data provided by the National Statistics Office of Vietnam on Monday (Jan 5).
Exports by domestic companies, however, fell 6 per cent, with the decline becoming pronounced from May after an early bout of front-loading ahead of threatened US reciprocal tariffs.
“The competitiveness of domestic enterprises remains weak and highly sensitive to order cycles and investment decisions by multinational corporations,” SHS Research analysts said in a December report.
They noted that a new US tariff framework – imposing a 20 per cent levy on goods deemed “made in Vietnam” and a punitive 40 per cent rate on transhipped products – has redirected orders towards foreign-owned factories with deeper production footprints and clearer origin traceability.
Vietnam’s tighter enforcement against origin fraud and illegal transhipment has also squeezed domestic trading firms, further reducing their role in the export engine, they added.
2. China’s outsized footprint
Vietnam’s dependence on China is becoming harder to ignore, not only as a source of manufacturing inputs and tourists, but also as a dominant supplier of capital.
While Singapore remained the largest single investor with US$4.8 billion in newly registered foreign direct investment (FDI), mainland China, Hong Kong and Taiwan combined emerged as the largest source of new FDI. The trio accounted for US$6.3 billion, or 36.5 per cent of newly licensed investment, in 2025.
Trade reliance is even more striking. China remained Vietnam’s largest import market, with inbound shipments jumping 29 per cent to US$186 billion. Vietnam’s trade deficit with China widened nearly 40 per cent to US$115.6 billion, underscoring the South-east Asian country’s role as a final-assembly hub dependent on Chinese intermediate goods.
Tourism data echoes the pattern. Vietnam welcomed about 21.2 million international visitors in 2025, up 20 per cent from the prior year and well above the pre-pandemic peak, aided by relaxed visa policies and a sharp rebound in Chinese travel.
Arrivals from China surged 41.3 per cent to 5.3 million, making it Vietnam’s largest source of tourists and surpassing Chinese travel to Thailand amid security concerns there.
3. Capital markets rising – without foreign money
Vietnam’s stock market delivered a stellar performance in 2025, with the VN Index climbing nearly 41 per cent, driven largely by large-cap stocks and domestic retail investors.
Yet, the rally unfolded against a backdrop of record foreign outflows. Overseas investors sold a net 135.3 trillion dong (S$6.6 billion) of Vietnamese equities – the third consecutive year of net selling.
Analysts cited a stronger US dollar, elevated global interest rates and better returns in developed markets as key drivers. Profit-taking also played a role, after Vietnam emerged as one of Asia’s best-performing markets.
Still, some see catalysts for a reversal. A scheduled upgrade to emerging-market status by FTSE Russell in September, robust public investment to support strong economic growth and a pipeline of initial public offerings could help lure foreign capital back.
“The recent rally has been concentrated in Vingroup and financial stocks, while valuations across many other sectors remain compelling,” Vietcap Securities analysts said in a December report, noting that foreign room has reopened in several blue-chip names at attractive prices.
4. Credit growth outpacing the economy
Credit expanded rapidly in 2025, with State Bank of Vietnam officials estimating growth at about 19 per cent, well above the 15 per cent recorded the year before.
That pushed the credit-to-GDP ratio to roughly 146 per cent, among the highest in the lower-middle-income nation group.
Deposit growth also lagged credit expansion by around three percentage points, creating a funding mismatch that contributed to rising interest rates.
“Attempts to raise economic activity through higher credit alone may result in overheating and raise the risk of fuelling real estate prices higher,” said Adam Ahmad Samdin, an economist at Oxford Economics.
For 2026, instead of loosening policy further to chase double-digit growth, the central bank has set a more conservative credit growth target of about 15 per cent, while leaving room for adjustments depending on inflation and macroeconomic conditions.
5. Chronic delays in public investment disbursement
Vietnam is embarking on one of its largest-ever fiscal pushes for infrastructure development, but execution risks remain entrenched.
In 2025, Vietnam’s public investment expenditure to GDP was raised to close to 7.5 per cent, the highest level since 2012. The fiscal deficit ceiling was revised upwards, to 4 to 4.5 per cent of GDP.
In 2026, Vietnam’s budget allocation of about 1,100 trillion dong is also set to push public investment to nearly 9 per cent of GDP, approaching levels seen in China during periods of intensive, infrastructure-driven growth.
These figures have prompted analysts to view Vietnam’s fiscal expansion last year as a “new normal” for the medium term, rather than a one-off stimulus.
Yet, disbursement continues to lag ambition. As at Dec 25, 2025, actual public investment disbursement reached just 69.6 per cent of the annual plan, according to the country’s Ministry of Finance.
The shortfall persists despite administrative streamlining, including mergers of ministries and provinces, the roll-out of a two-tier local government system and greater decentralisation.
Market watchers attributed the delays to land-clearance bottlenecks, lengthy approval processes, fragmented responsibilities and a lingering “fear of responsibility” among officials.
6. Electricity growth tells a different story
Perhaps the most puzzling metric is electricity consumption, long considered a reliable proxy for real economic activity.
Vietnam Electricity reported total commercial power output of 287.9 billion kilowatt-hours in 2025, an increase of 4.9 per cent. That marked a sharp slowdown from the 9.2 per cent growth recorded in 2024, and fell well short of official forecasts of around 12 per cent to support the 8 per cent GDP growth.
Dr Pham The Anh, head of the Faculty of Economics at National Economics University, believes Vietnam’s electricity-to-GDP elasticity last year was “abnormal”, noting that it has historically remained above one.
This means that for every 1 per cent increase in GDP, the power sector needs to grow at a higher multiple – around 1.4 to 1.7 times – to supply sufficient energy for socio-economic development.
The gap has raised questions about whether GDP growth overstates underlying activity, or whether structural shifts are at play.
“Why the electricity-to-GDP elasticity has behaved abnormally, or whether GDP growth this year is genuinely high, are important questions that require convincing explanations backed by concrete data,” said Dr Pham.
“This would be extremely helpful for economic policymaking and power-sector planning.”
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