Vietnam achieves over 8% growth in two quarters amid trade challenges
Inflation there is the highest in the region, though it remains manageable and stays below the target range
[HO CHI MINH CITY] Vietnam is approaching its full-year gross domestic product growth target of between 8.3 and 8.5 per cent this year, as the economy continues to show strength despite ongoing trade challenges.
With robust consumption, investment and export activities, growth accelerated to 8.23 per cent year on year in the third quarter, quickening from the upwardly revised 8.19 per cent in the previous quarter, going by preliminary data from the country’s National Statistics Office on Monday (Oct 6).
Excluding the pandemic-driven rebound in 2022, this was the fastest third-quarter expansion since 2011, bringing the GDP growth rate in the first nine months to 7.85 per cent from the year before.
The standout was fixed investment growth, which surged 9 per cent year on year, in the strongest quarterly expansion since 2017. The increase was likely driven by both government and private-sector domestic investments.
In the first nine months, public investment disbursement rose by more than 43 per cent from the corresponding period last year. Realised foreign direct investment rose 8.5 per cent to US$18.8 billion – the highest for any nine-month period since 2008.
Tariff challenges
Despite the 20 per cent tariffs imposed by the US from early August, Vietnam’s exports surged 24.7 per cent year on year to reach US$42.67 billion in September 2025, pushing the Q3 goods export growth to 18.4 per cent from the year before. Imports jumped 24.9 per cent to US$39.82 billion, driving the monthly trade surplus to US$2.85 billion.
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For the first nine months of the year, exports and imports rose 16 per cent and 18.8 per cent, respectively, resulting in a trade surplus of US$16.82 billion. Last year’s surplus for the nine-month period was US$21.15 billion.
In a Sep 18 report, the United Nations Development Programme (UNDP) estimated that the tariffs could slash up to a fifth of Vietnam’s US-bound exports, potentially making it the hardest-hit South-east Asian economy.
Shipments to the US in September were down by 1.4 per cent from August’s levels. However, the US continues to be Vietnam’s largest export market for the year to date, receiving US$112.8 billion in Vietnamese goods. This accounted for roughly a third of Vietnam’s total exports in the first nine months of 2025.
Vietnam’s trade surplus with the US hit US$99.1 billion from January to September, marking a 28.3 per cent increase year on year.
It is worth noting that smartphones, consumer electronics and components such as semiconductors and integrated circuits have been exempted from US reciprocal import tariffs. This gave Vietnam some relief, given that these exempted products make up about 28 per cent of US-bound exports from the South-east Asian country, according to UNDP estimates.
In September, electronics exports continued to drive Vietnam’s total global shipments, growing by 66.2 per cent year on year to US$10.8 billion.
“Downside risks to exports stem from potential sectoral tariffs on semiconductors, seeing that the threat on pharmaceuticals has been realised,” noted Adam Ahmad Samdin, economist at Oxford Economics. “The unclear definition of ‘transhipment’ also poses a tail-risk.”
The US imposed a 40 per cent levy on transhipments from third countries passing through Vietnam.
Soft data from S&P Global’s September purchasing managers’ index (PMI) survey indicated that new export orders continued to decline, although the pace of contraction slowed to its weakest point in the current 11-month streak of declines.
“International demand reportedly remained muted, but stability in US tariff policies reportedly helped some firms to secure new business from abroad,” the report added.
To address the elevated tariffs in the US, Hanoi is actively seeking to sign new free trade agreements in other markets, including those with Latin American and Gulf Cooperation Council countries; it hopes to do so by year’s end, said a recent statement by Vietnam’s Prime Minister Pham Minh Chinh.
Inflation pressures
The drive for higher growth this year comes with the trade-off of rising inflation. The State Bank of Vietnam, the country’s central bank, has set an official inflation cap in the range of 4.5 to 5 per cent, and a credit growth target of 16 per cent for 2025.
In 2024, these metrics had been capped at 4 per cent for inflation and 15 per cent for credit growth.
However, Vietnam’s annual consumer prices have remained within a manageable range, rising 3.27 per cent in the first nine months of the year. Inflation quickened its pace in September, which saw the highest increase in three months, at 3.38 per cent.
Meanwhile, core inflation – excluding volatile items – slowed to a five-month low of 3.18 per cent last month, with a year-to-date rate of 3.19 per cent from January to September.
This occurred despite a surge in credit growth, with lending increasing by 13.4 per cent as at Sep 29, up four percentage points from the same period last year.
The central bank expects credit growth to accelerate to 19 to 20 per cent by year-end, as it seeks to prioritise growth for the remainder of the year; it urged banks to reduce lending interest rates to support this expansion.
Oxford Economics’ Adam noted that while Vietnam’s inflation stayed the highest in the region, it could be weighed down by external forces, such as weak oil prices and the likely disinflationary contributions of falling Chinese producer prices, given the intensity of Chinese imports.
Vietnam imported US$134.4 billion in goods from China in the first three quarters, accounting for 40 per cent of the country’s total imports in the period.
S&P Global’s PMI report indicated that inflationary pressures intensified at the end of Q3, with input costs and selling prices rising at their fastest since July 2024. Survey respondents linked the increase in input costs to higher market prices and unfavourable exchange rate movements.
The Vietnamese dong has depreciated by nearly 3.5 per cent against the greenback since the beginning of this year, making it the worst-performing currency in Asean, where the currencies of its peers have appreciated by 6 to 7 per cent against the US dollar.
Booming tourism story
This foreign exchange reality, however, played a role in boosting tourist arrivals to Vietnam in the first three quarters. Visitor arrivals climbed 21.5 per cent to 15.44 million, led by strong gains from China (43.9 per cent), Japan (16.8 per cent), India (42.9 per cent), Cambodia (50.4 per cent), and the Philippines (92.2 per cent).
The strong pace of international arrivals in September also boosted retail sales, which grew by a robust 11.3 per cent year on year. In the first nine months of the year, retail sales rose 9.5 per cent.
Thanks to affordability and perceptions of safety, Vietnam surpassed Thailand as the most popular Asean destination for mainland Chinese tourists in August – and this was despite the absence of a visa-free scheme between Vietnam and China. Chinese arrivals to Vietnam increased from 3.5 million to 3.9 million by the end of September.
“While Vietnam does not rely on tourism per se, its booming tourism story offers a diversified growth story, especially when there is more potential to grow,” Yun Liu, Asean economist at HSBC, wrote in a note on Sep 25.
She highlighted that the current share of Chinese tourists in Vietnam’s total arrivals is still well below the 32 per cent recorded before the pandemic in 2019. The effects of Golden Week – the long holiday for Chinese people from Oct 1 to 8 – can also be expected to encourage travel.
Liu added: “For Asean, which has been worrying about the impact of tariffs on its manufacturing sector, this will be an opportunity to shore up its services sector as a way to partially shield against the impact of the tariffs.”
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