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Market Insights August 2026

Production and Exports Keep Accelerating, While the Trade Deficit Widens and Consumption Stays Cautious

IN BRIEF

• Production, exports and investment kept accelerating. July IIP rose 14.5% YoY (7M: +11.4%, a multi-year high), led by manufacturing (+12%), while exports jumped 25% YoY on electronics (+55.1%) and wire and cable (+44.5%). Public investment disbursed VND 98.6tn in July (7M: VND 425.3tn, 41.9% of plan) and 7M FDI disbursement reached $15.2bn, the highest in 5 years.
• The trade deficit keeps widening. July imports reached $56.7bn, leaving a $3.6bn monthly deficit and $20.5bn for 7M. Most of the growth is machinery and equipment for domestic investment projects that won't feed export growth; if the trend persists, pressure on the exchange rate and FX reserves could build.

• Macro stability holds, but equities corrected sharply. July CPI fell 0.12% MoM, keeping 7M average inflation at 4.39%, below the 4.5% target, though core inflation rose to 4.63%. Interbank liquidity improved with overnight rates at times below 1%, while the VN-Index fell 6.7% MoM (-2.7% YTD) on thin turnover of VND 19.3tn a day and VND 11.9tn of foreign net selling.

The Industrial Production Index (IIP) rose 14.5% YoY in July, bringing 7-month cumulative growth to 11.4%, the highest in several years. Processing and manufacturing remained the main driver at +12%. Electricity production and distribution grew 9.9%, pointing to continued expansion in industrial power consumption, while mining rose 6.6%. By sub-sector: metal production +23.5%, motor vehicles +16%, beverages +15.7%, furniture +13.3% and electronics +12.8%.

July export turnover rose 25% YoY, showing global demand remains resilient. High-tech goods stayed the main driver, with electronics exports up 55.1% and phones up 22.2%, reaffirming Vietnam's role as an electronics manufacturing hub. Wire and cable exports surged 44.5% on global investment in power infrastructure, data centers and AI projects. Key agricultural products also kept posting gains: vegetables and fruit +40.8%, animal feed +51.8%, coffee +15% and seafood +13.5%. The domestic enterprise sector further improved its export position, growing 14%.

However, imports kept growing faster than exports. July imports reached $56.7bn, resulting in a $3.6bn trade deficit and pushing the 7-month cumulative deficit to $20.5bn. Most of the growth came from machinery, equipment and components for production expansion, much of it serving domestic investment projects that won't translate into export growth. This trend bears close watching: if it persists, pressure on the exchange rate and FX reserves could build.

Public investment disbursement stayed strong at VND 98.6tn in July, well above the first-half average, as ministries and localities accelerated implementation of key projects. YTD disbursement reached VND 425.3tn, or 41.9% of the Prime Minister's assigned plan.

FDI disbursement also kept its positive trend, reaching $15.2bn over the first seven months, the highest in five years. With both public investment and FDI sustaining growth, this is an important support for production, exports and economic growth in the coming quarters.

Inflation kept improving as July CPI fell 0.12% MoM, keeping 7-month average CPI growth at 4.39%, below the government's 4.5% inflation control target. Cooling energy prices in the last weeks of the month were a key factor in stabilizing domestic prices. Inflationary pressure has not fully disappeared, though: core inflation over the first seven months rose to 4.63%, higher than headline CPI growth, indicating that underlying drivers such as service costs, wages and consumer demand remain relatively elevated. US-Iran military tensions also flared up again in July after the ceasefire broke down; although they eased toward month-end and brought oil prices down significantly, the unpredictable path of the conflict shows the global environment still carries meaningful risk.

Domestic consumption improved but continued to lag production and exports. Total retail sales of goods and consumer services rose 13.1% YoY over the first seven months, or about 7.5% in real terms after adjusting for prices, showing continued improvement in purchasing power. Even so, the consumption recovery remains well behind production and exports, reflecting relatively cautious household spending and the lingering effect of previously high interest rates.

Money Market: Banking system liquidity kept improving in July. The overnight interbank rate stayed on a downward trend, at times dipping below 1%, reflecting relatively abundant system liquidity. Against this backdrop, the State Bank gradually scaled back liquidity support via open market operations, net-draining VND 76.9tn during the month and bringing outstanding OMO volume down sharply to VND 168tn by month-end, from a peak of nearly VND 490tn. On the primary market, however, funding demand stayed strong, prompting many commercial banks to keep raising deposit rates to meet elevated credit demand.

Despite the trade deficit, the USD/VND rate broadly held stable, supported by healthy FX supply from FDI disbursement. Still, FX pressure could build if the trade deficit persists or if geopolitical risks push the dollar sharply higher globally. Overall, current indicators show Vietnam's economy maintaining positive growth momentum, driven mainly by production, exports and investment, while macro stability holds even as external risks remain.

Stock Market: Vietnam's stock market corrected fairly sharply in July after its earlier hot rally. The VN-Index dropped as much as 9.6% to a low of 1,680 points before recovering in the final week, ending the month down 6.7% and pushing YTD return to -2.7%. The VN30 fell 6.2% for the month and 7.8% from end-2025, on profit-taking in large caps despite fairly positive Q2 earnings.

By sector, most groups posted negative returns. Financials fell 8.0% MoM, while industrials (-12.3%), consumer discretionary (-13.0%), materials (-10.4%) and IT (-5.1%) all corrected significantly. Defensive sectors such as consumer staples (-0.2%) and energy (-0.5%) declined less. YTD, only energy (+29.8%) and real estate (+14.3%) remain positive.

Caution returned as investors locked in profits after the earlier rally. Average daily turnover was just VND 19.3tn, down 43% from March's peak. Foreign investors continued net selling, at VND 11.9tn in July, bringing YTD net selling to VND 92.3tn. With Q2 results now reflected, the VN-Index's TTM P/E dropped notably to 13.1x from 15.2x the prior month, though rising rate pressure is making equities less attractive