Given the big upside surprise in the third quarter of 2025, HSBC now raises yearly GDP growth forecast to 7.9 per cent for 2025 (from 6.6 per cent), and 6.7 per cent for 2026 (from 5.8 per cent), according to HSBC's report: Vietnam at a glance released on October 28.
"But we also need to be mindful of the biggest downside risk to growth: trade volatility," the report noted. "We are also raising our inflation forecast slightly, to 3.3 per cent (from 3.2 per cent) for 2025 and 3.5 per cent (from 3.2 per cent) for 2026."
Specifically, this is the second quarter that Vietnam’s growth has exceeded 8 per cent year-on-year, easily beating market expectations.
What surprises us the most is the resilience of the externally-oriented industries, and this reflects in manufacturing and trade, the report said. Despite an uncertain trade environment, industrial production (IP) grew 10 per cent year-on-year in the third quarter.
Not surprisingly, trade continues to boom with exports and imports both hitting close to 20 per cent year-on-year growth. But what is more encouraging is the trade surplus Vietnam has retained, which has more than doubled to $3 billion in the third quarter, from the first half of 2025. This indicates Vietnam has widened its trade surplus with trading partners other than the US, although the latter remains its biggest exporting destination with one-third of the total share.
A closer look at the data reveals the main driver of trade: the electronics products. This boosts Vietnam’s exports to the US significantly, with exports still hitting almost 30 per cent year-on-year in the third quarter,. "While frontloading trade activities have peaked across ASEAN, Vietnam’s export growth to the US market remains elevated, reflecting another trend we have been witnessing across Asia: that tech-exposed economies are benefiting from high AI-driven tech demand, providing a hard backbone to their trade," the report shows.
Despite challenges in trade of goods, the services sector provides some anchor to growth. Retail sales have seen some meaningful improvements, while tourism continues to flourish as Vietnam leads ASEAN in tourism recovery. In addition, the government’s push for mega-infrastructure projects has boosted construction activities. There is potential to grow more, if the public investment disbursement can accelerate, which accounts for only 50 per cent of the annual target as of the third quarter.
In addition to public investment, FDI remains a key driver in fuelling Vietnam’s growth. Since the liberation day anniversary in April, there have been increasing concerns on the sustainability of Vietnam’s FDI inflows. Total FDI rose 15 per cent year-on-year as of the third quarter but new registered FDI fell 9 per cent year-on-year. Interestingly, the composition of Vietnam’s FDI portfolio has shifted this year. In 2024, Singapore, Korea and mainland China were the top-three investors.
However, Singapore and mainland China now account for around a quarter of new FDI, respectively, while South Korea’s share dwindled, with the US filling the gap. In other words, despite trade uncertainties, the world’s two largest economies continue to pour their investments into Vietnam. After all, now that all ASEAN EM are back to the same starting line, facing tariffs of “19-20 per cent”, existing beneficiaries of the trade tensions will continue to benefit, for example, Malaysia and Vietnam.
Outside of growth, inflation remains largely in check. Despite a modest pick-up in momentum of 0.4 per cent month-on-m, headline inflation rose 3.4 per cent year-on-year in September, in line with market expectations (HSBC: 3.4 per cent; BBG: 3.4 per cent). The main drivers were rising food prices, due to increasing demand during the National Day holidays, and increasing petrol prices. Core inflation remains stable at 3.2 per cent year-on-year, well below the STate Bank of Vietnam (SBV)'s “4.5-5 per cent” inflation ceiling.
With inflation taking a backseat, the SBV aims at higher credit growth to support growth. Credit growth has seen a spike to 20 per cent year-on-year at the end of August, on track with the SBV’s expectation of annual expansion of 19-20 per cent, higher than its original target of 16 per cent.
"All in all, Vietnam’s growth outperformance makes it stand out in ASEAN," the report affirmed.
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