Economic growth hits a two-year high in Q2

GDP growth overshoots market expectations: Vietnam’s economy continued to gallop ahead in Q2, with GDP surging 8.0% annually (Q1: +7.0% yoy), the fastest growth in two years and one of the sharpest rates of expansion globally. The reading exceeded market expectations and matched the government’s annual target of 8.0%.

All areas of the economy improve: The industrial and services sectors—which account for roughly 40% of GDP each—helped drive the upturn. Growth of the former accelerated to 9.0% (Q1: +7.6% yoy), and of the latter to 8.5% (Q1: +7.8% yoy). The industrial sector was bolstered by a strong external sector as firms front-loaded sales ahead of U.S. “reciprocal” tariffs; merchandise exports grew by more than 20% in Q2, almost doubling Q1’s reading. In addition, agricultural sector growth picked up to 3.9% in Q2 (Q1: +3.8% yoy).

Panelists turn less pessimistic: Our Consensus has been repeatedly cut since January amid protectionism in the U.S., which is Vietnam’s largest export market, accounting for 30% of Vietnam's exports in 2024. In recent weeks, positive news regarding a trade deal with Trump’s administration has prompted our panelists to become slightly less pessimistic. That said, Vietnam’s GDP growth is still seen below the government’s 8.0% target in 2025 as a whole; front-loading of exports will wane later this year. Higher uncertainty in the property market is a downside risk to GDP growth, and U.S. trade policy is key to track.

Panelist insight: Commenting on the outlook, Suan Teck Kin, analyst at United Overseas Bank, stated: “The latest development on the trade negotiations with the US appears promising for Vietnam, following US President Trump’s announcement of a 20% tariff on Vietnam’s imports to the US with a 40% tariff on transshipments. We see the worst of the tensions has past and are factoring in a modest pace of exports growth in 2025. Accordingly, we’re revising higher our forecast for Vietnam’s GDP growth in 2025.” On a similar note, Chua Han Teng, analyst at DBS Bank, stated: “While we anticipate slower and volatile growth in 2H25 due to still-high global trade frictions, the surprisingly robust performance in 1H25 warrants an upward revision of our 2025 real GDP growth forecast […]. However, uncertainty remains regarding the interpretation of transshipment goods that will face 40% US tariffs.”

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