The latest figures from the National Statistics Office at the Ministry of Finance (MoF) show that Vietnam’s Index of Industrial Production (IIP) in October was estimated to have risen 2.4 per cent against September and 10.8 per cent year-on-year. Over the first ten months of 2025 the IIP is estimated to have grown 9.2 per cent year-on-year.
Driving expansion
The manufacturing and processing sector remained the main engine of industrial growth, rising 10.5 per cent year-on-year in the first ten months compared with 9.5 per cent in the same period of 2024. The sector contributed 8.5 percentage points to overall 9.2 per cent growth, underlining its pivotal role in the national industrial structure.
Growth was also strong in key secondary industries, with many recording significant increases, reflecting both higher market demand and improved production capacity.
Industrial production rose in all 34 cities and provinces nationwide in the period, with some localities posting particularly high growth in manufacturing and processing compared to the same period last year.
The industrial workforce also grew steadily. As of October 1, the number of employees in industrial enterprises had increased 0.8 per cent from the previous month and 3.6 per cent year-on-year. State-owned enterprises recorded a 0.1 per cent monthly rise and 2.6 per cent year-on-year; while foreign-invested enterprises saw 0.9 per cent monthly growth and 4.1 per cent annually. These figures suggest that business confidence in production and growth prospects continues to strengthen.
PMI jumps as new orders surge
One of the key indicators of industrial growth is the Purchasing Managers’ Index (PMI). In a report released in early November, S&P Global put Vietnam’s PMI in October at 54.5, a sharp increase from 50.4 in September, signaling strong improvement in the health of the manufacturing sector.
The driver behind this breakthrough growth was a significant rise in both production and new orders. Specifically, new orders increased at the fastest pace since July 2024, supported by stronger customer demand. Notably, new export orders also rose for the first time in a year.
To meet the surge in new orders, manufacturers ramped up production, marking the strongest output increase since July 2024. Production has now expanded for six consecutive months. Alongside rising output, companies expressed greater optimism about the next 12 months, with business sentiment reaching a 16-month high, fueled by expectations that new orders will continue to grow and production capacity will expand accordingly.
“Rising new orders and the accompanying increase in production also led to higher employment in October, marking the first rise in over a year,” S&P Global noted in the report. “Manufacturers added staff to cope with emerging pressures on operating capacity.” The report also highlighted that rising new orders and production requirements encouraged companies to increase purchasing activity, marking the fourth consecutive month of such growth.
According to Mr. Andrew Harker, Economics Director at S&P Global Market Intelligence, the positive aspect is that growth was strong enough for companies to hire additional staff and build up raw material inventories. However, it remains to be seen whether this growth can be sustained in the months ahead.
Manufacturing fuels FDI growth
As of October 31, manufacturing and processing had received the largest amount of newly-licensed FDI, with registered capital reaching $7.97 billion, accounting for 56.7 per cent of total newly-registered capital and asserting the sector’s role as the main driver of FDI attraction. Total registered FDI in the sector stood at $16.37 billion, representing 62.5 per cent of total newly-registered and additional capital.
FDI inflows into manufacturing and processing are not only growing in volume but also in quality, as reflected in disbursed capital. According to the NSO, actual FDI disbursement in the first ten months across the economy was estimated at $21.3 billion, up 8.8 per cent year-on-year and the highest level in this period for the past five years. Manufacturing and processing accounted for $17.68 billion, or 83 per cent, of total FDI disbursement.
Experts noted that Vietnam’s appeal among foreign investors in the sector is driven by multiple factors: political stability, a favorable geographic location, competitive costs, improved logistics infrastructure, and increasingly-sophisticated production capacity. In addition, global supply chain shifts, where multinational companies move part of their operations from China to other countries, continue to benefit Vietnam, positioning the country as a “new manufacturing hub”.
Despite strong FDI inflows and the continued leadership of manufacturing and processing, the Foreign Investment Agency at the MoF cautioned that risks remain if the electronics and component supply chain experiences disruptions. Large FDI inflows in the sector have made Vietnam an important link in the global supply chain over the last few years.
At a recent seminar gathering expert advice on socio-economic trends, organized by the National Assembly’s Committee for Economic and Financial Affairs, experts highlighted two factors likely to affect FDI flows in the coming period: the Global Minimum Tax and changes in supply chains at both international and regional levels. Additionally, the US’s reciprocal tariffs policy could also significantly influence FDI relocation trends.
To maintain its appeal, Vietnam needs to facilitate investment by continuing to reform administrative procedures to speed up licensing and reduce pre-investment costs. At the same time, alternative support mechanisms should be applied in place of tax incentives. Specific supportive measures with significant room for implementation include facilitating access to land and business premises; supporting infrastructure and social housing in and near industrial parks; simplifying visa and work permit procedures; and providing workforce training.
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