Vietnam: Vietnam’s GDP growth surges in Q2
Economic growth overshoots estimates: Vietnam’s GDP grew 8.4% in annual terms in Q2, following upwardly revised 7.9% growth in the previous quarter. The country is on track to record the fastest growth rate in ASEAN and one of the strongest performances globally. Moreover, the outcome surprised markets, which had expected higher energy prices stemming from the Middle East conflict to dampen economic growth during the quarter.
Industrial sector drives boom: Compared to the previous quarter’s data, readings in Q2 improved for the industrial sector (+10.5% on a year-on-year basis vs +9.0% in Q1) and the agricultural sector (+4.1% vs +3.7% in Q1). In contrast, the reading for the services sector softened in Q2 (+7.9% vs +8.3% in Q1).
The industrial sector accounted for the lion’s share of growth in the quarter, with export-oriented manufacturing bolstered by strong global AI hardware demand and construction by the ramp-up of public infrastructure investment. Moreover, construction benefited from Resolution 29, which unlocked an estimated USD130 billion—roughly 25% of Vietnam’s GDP—of capital that had been frozen during the 2022-24 anti-corruption drive. Foreign direct investment also made a significant contribution to overall GDP growth, reaching a record USD13 billion in H1, boosted by the Samsung, Amkor and LG Display capacity build-outs.
Economic growth to ease in Q3: The government is targeting a growth rate of 11.9% in H2 to achieve its ambitious target of 10% growth in 2026 as a whole, but our Consensus is for economic momentum to ease in Q3. Much of Q2’s acceleration was driven by the one-off impact of Resolution 29, which allowed previously stalled projects to resume construction. As this backlog is gradually cleared, the contribution from project restarts is expected to fade. External risks are also mounting, with the U.S. Section 301 investigation on Vietnam scheduled to be concluded on July 24; this could result in the effective U.S. tariff rate on Vietnamese exports being raised from 16.7% to 21.2%.
Panelist insight: Commenting on the outlook, EIU analysts stated:
“We expect growth to slow markedly in the second half of the year as the export rush unwinds and US tariffs take hold. The 10% Section 122 surcharge will lapse on July 24th; the Section 301 duties expected to replace it will apply a tariff rate of 12.5% with a few exemptions. A separate US investigation into Vietnam’s intellectual-property regime concludes on November 29th and any tariffs from it will be added, pushing the effective tax rate above 20%. If the multiple investigations result in harsher than anticipated tariffs, Vietnam’s growth slowdown will deepen into 2027.”